BSP lowers 2020 BOP surplus target to $600 M

By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) has lowered its 2020 balance of payments (BOP) surplus estimate to $600 million from its previous forecast of $2.9 billion but expects it to improve to $2.4 billion surplus next year.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg) Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno. (Bloomberg)

BSP Governor Benjamin E. Diokno said Thursday that the Monetary Board has approved the revised BOP projections for both 2020 and 2021 outlook.

“The overall BOP levels in 2020 and 2021 are projected to sustain the current surplus trend, though at levels lower than prior to the COVID-19 pandemic,” according to Diokno.

For this year, based on new estimates, the BOP as a percentage of GDP will drop from 0.7 percent (previous projection) to 0.2 percent as of May 2020 estimates. Actual BOP as a percentage of GDP in 2019 was 2.2 percent. The projection for 2021, in the meantime, is that it will improve to 0.6 percent from 0.2 percent.

Diokno said the BSP also lowered the current account deficit projection for 2020 to $1.9 billion as of May 2020 estimates versus the $8.9 billion current account shortfall (November 2019 projection).

For 2021, the current account projection is still in a deficit of $4.4 billion.

The current account deficit as a percentage of GDP will decrease from -2.1 percent (as of November 2019) to -0.5 percent (May 2020). Next year, it will increase to -1.1 percent.

Diokno said the BOP reassessment “incorporates key developments during the first four months of 2020 and 2021 BOP outlook since it was approved by the Monetary Board on December 11, 2019.”

“This include expectation of sharp contraction in both global and domestic economic activities in 2020, followed by a strong recovery in 2021; a shift toward increased monetary policy accommodation among central banks worldwide; and continued trade and political tensions, among others,” he said.

On Thursday, the BSP said the country’s BOP surplus stood at $1.598 billion as of end-April after three months of deficits.

The BOP reversed to a four-month surplus after reporting a $1.666 billion surplus for the month of April.

“The BOP surplus in April 2020 reflected mainly the inflows arising from the National Government’s (NG) deposit with the BSP of its foreign loan proceeds as well as the BSP’s foreign exchange operations
and income from its investments abroad,” according to the BSP.

“These inflows were partially offset, however, by the foreign currency withdrawals made by the NG to pay its foreign currency debt obligations during the month in review,” said the BSP.

The April BOP surplus of $1.666 billion is more than March’s $448 billion surplus and $467 million the year before.

The surplus in April brought the cumulative BOP to an excess of $1.598 billion from $68 million shortfall in January, February to March.

“However, this level was lower than the US$4.27 billion surplus recorded a year ago,” noted the BSP.

“This development may be attributed partly to the reversal of foreign portfolio investments to net outflows in January-April from net inflows and lower net inflows of foreign direct investments in January-February compared to the previous year's level. The foreign portfolio investment outflows and lower foreign direct investments inflows were mitigated by the lower merchandise trade deficit and higher remittances from overseas Filipinos in January-March,” it explained.

The BSP also reported the final gross international reserves (GIR) for end-April of $90.94 billion.

“At this level, the GIR represents an ample external liquidity buffer,” said the BSP. The current reserves level is equivalent to eight months’ worth of imports of goods and services and payments of primary income and it is 5.5 times the country’s short-term external debt based on original maturity and four times based on residual maturity, said the BSP.