BSP to revise BOP deficit estimates

By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has finalized its latest balance of payments (BOP) deficit estimates for review by the Monetary Board this week.

Bangko Sentral ng Pilipinas (BSP) logo

The BSP releases external accounts forecasts such as the BOP and its components, and the gross international reserves (GIR) every July and October-November.

The BSP has a current BOP deficit projection of $1.5 billion. As of end-October, BOP shortfall has widened to $5.59 billion, higher than same time last year of
$1.73 billion deficit.

The BOP shortfall was bigger mainly because of the increased deficit in the current account due to the widening trade-in-goods deficit that was brought about by increased imports of goods in support of domestic capital formation and production, according to the central bank. As of end-August, the current account deficit was at $3.1 billion, more than end-August 2017’s $133 million deficit.

The overall BOP deficit for the month of October only was lower at $458 million compared to September’s $2.70 billion deficit. The September deficit was the highest monthly deficit for 2018. Last year, for October, the deficit was $368 million.

The BSP said the higher deficit was partly because of higher merchandise trade deficit in the first quarter due to the sustained rise in imports of raw materials and intermediate goods as well as capital goods to support domestic economic expansion.

The BSP also said the current GIR level of $74.71 billion as of end-October is “more than ample liquidity buffer”. It is equivalent to 6.8 months' worth of imports of goods and payments of services and primary income. It is also 5.7 times the country's short-term external debt based on original maturity and 3.9 times based on residual maturity.

The BSP has a GIR estimate of $80 billion for 2018.

The International Monetary Fund (IMF) said the country’s current account deficit is projected to remain manageable however, and that it will continue to be financed largely by foreign direct investment. As of end-August, net FDI has reached $7.42 billion, up 31 percent year-on-year.

The IMF expects current account deficit of $1.5 billion for 2018, lower than BSP’s own estimates of $3.1 billion. The current account records inflows of overseas Filipino remittances as well as business process outsourcing and tourism receipts. All these are structural inflows and major sources of foreign exchange for the country.