BSP expects lower BOP surplus of $3 B in 2020

Published December 13, 2019, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) estimates a balance of payments (BOP) surplus of $3 billion in 2020 from the higher-than-projected $4.8-billion surplus for this year.

The BSP, however, still expects a current account deficit next year of $8.4 billion from the revised shortfall of $5.6 billion for 2019.

BSP Department of Economic Research Director Dennis D. Lapid said the revised estimates for both 2019 and 2020 are based on key considerations such as the more subdued global economic growth outlook, softer global trade growth and continued vulnerability of commodity prices.

He said the “lingering uncertainty” of the US-China trade disputes has “led to volatility in financial markets and downward (influence) in investor/business sentiments” and were factors to the revised BOP outlook.

Lapid also cited the anticipated US Federal Reserve pause in 2020 after the interest rate cuts this year, the Brexit uncertainty, and the sustained capital inflows to emerging economies as reasons for new external accounts numbers. The continued favorable growth prospects of the local economy is also a key consideration.

The $4.8 billion expected BOP surplus this year is higher than previous (June 2019) projection of $3.7 billion. The current account deficit was also adjusted but lower from previous estimate of $10.1 billion.

The 2020 BOP surplus is equivalent to 0.7 percent of GDP while the current account shortfall is -2.1 percent of GDP. For 2019, the BOP number is equivalent to 1.3 percent of GDP and -1.5 percent for the current account.

In the meantime the BSP also revised its gross international reserves which it now expects will hit $86 billion in 2020 and $85 billion this year. A significant portion of GIR comes from remittances that the central bank sees as still growing by three percent this year and in 2020.

The BSP also cut the projections for foreign direct investments (FDI) for 2019 at $6.8 billion net from the previous $9 billion, while expecting an improvement to $8.8 billion in 2020.

As for foreign portfolio investments, the 2019 estimate is now increased to $8 billion from $4 billion (June 2019) but for 2020, it will only slightly improve to $8.2 billion, based on BSP projections.

During Friday’s quarterly BOP report, the BSP the current account deficit in the first three quarters stood at $992 million which was 83 percent lower compared to same time last year of $5.8-billion deficit.