The Bangko Sentral ng Pilipinas (BSP) has revised anew its external account projections for this year and in 2021, it now sees a higher balance of payments (BOP) surplus of $12.8 billion on account of weak import demand since the economy is not yet fully opened due to the pandemic.

The BOP surplus estimate, which was approved by the Monetary Board on Thursday, is higher than its September projection of $8.1 billion. The new BOP forecast is equivalent to 3.4 percent of GDP while the previous projection was 2.2 percent of GDP.

For next year, the BSP adjusted its BOP surplus estimate to $3.3 billion or 0.8 percent of GDP which was lower than the previous $3.4 billion or 0.9 percent of GDP, because of the moderation of the current account surplus in 2021 with the resumption of more economic activity.

The BOP components such as the current account is now expected to have a higher surplus at $8.4 billion compared to the previous $6 billion estimate. The new projection is equivalent to 2.3 percent of GDP versus the previous 1.6 percent. The current account surplus is due to in part to the estimated narrower trade-in-goods deficit.

For 2021, the current account is seen at $6.1 billion which was more than earlier projection of $3.1 billion.

The financial account sector, in the meantime, is expected to have net inflows of $3 billion this year from $700 million previous estimate. The BSP forecasts net foreign direct investments of $6 billion for 2020, more than its September estimate of $5.6 billion while net foreign portfolio investment is adjusted to $2.8 billion from $2.4 billion previously.

The financial account’s $3 billion net inflows projection is based on the programmed and projected foreign borrowings and upward revision in FDI and hot money flows.

The estimates for 2021 financial account is a surplus position of $4.4 bilion, higher than previous estimate of $1.2 billion. The net FDI and hot money portfolios are projected at $7.5 billion and $3.5 billion, respectively which is “in line with the consensus view of a recovery in investment sentiment given better global and domestic economic prospects next year,” said the BSP.

The gross international reserves is expected to be at $105 billion at end-2020 from its earlier forecast of $100 billion, and for next year, it’s projected at $106 billion. As of end-October, the country’s reserves or buffer fund is at $103.8 billion.

The BSP did not change the projection for cash remittances, it is still a negative two percent for 2020 due to the global coronavirus outbreak. For 2021, the projection is also not changed at four percent.

BSP Deputy Governor Francisco G. Dakila Jr. said the revised forecasts takes into account the latest actual BOP numbers which as of end-October was at $10.3 billion surplus, and the current global and local economic conditions and the outlook.

Dakila said the latest BOP assessment has also factored in the impact of the pandemic in the second quarter figures.

 “While recent external account figures remain below pre-pandemic trend and still in the negative territory, these are expected to improve from the first half of the year,” a statement from the BSP said.

The BSP’s projection for services exports is that it will drop by 21.4 percent in 2020 because of “steeper” decline in travel receipts “as the tourism industry continue to take a hit from the pandemic and the downward revision in the growth of the IT-BPO industry following lower than anticipated revenue turnout in the first half of 2020.”

“While the revised set of BOP projections are anchored on a narrative of a gradual ascent from the trough of the COVID-19 impact and improved market confidence following positive vaccine news, downside risks remain,” BSP officials said. “Among the major risk factors are the re-imposition of strict lockdowns among the country’s major trading partners as well as the potential economic implications of the unprecedented global debt accumulation and adoption of exit measures from massive financial stimulus.”