The Bangko Sentral ng Pilipinas has revised the country’s balance of payments (BOP) surplus projection for 2021-2022 on lower current account balance and other risks to growth such as rising COVID-19 cases and vaccine supply and logistical issues.
For 2021, the BOP surplus projection has been narrowed to $4.1 billion from previous estimate (June) of $7.1 billion.
For 2022, the BSP also downgraded its BOP surplus projection to $1.7 billion from $2.7 billion it announced last June 17-18.
The revised 2021 BOP projection is equivalent to 1.1 percent of GDP while next year’s projection is 0.4 percent of GDP.
The latest revisions were approved Thursday (September 16) by the Monetary Board. As of end-June, the country has a BOP deficit of $1.9 billion.
BSP Managing Director Zeno R. Abenoja said Friday that the main reason for adjusting the BOP outlook is the lower current account, one of the key components of the BOP.
The current account surplus which in June was projected at $10 billion for 2021 has been reduced to $3.5 billion. For 2022, current account will likely incur a deficit of $1.4 billion, reversing the previous projection of $6.7 billion surplus.
BSP Senior Director Redentor Paolo Alegre Jr. of the Department of Economic Statistics, who presented the latest BOP numbers, said that as of end-June, the current account reversed to a deficit of $1.2 billion from a surplus of $4.8 billion same period in 2020, due to a bigger trade deficit and lower net receipts of primary income.
Abenoja said the BSP “has a guarded view of global and domestic developments going into the remaining months of the year.”
He said there are two major risks to their outlook, the rapid spread of the COVID-19 Delta variant and the vaccination drive, and whether or not there will be enough supply. He is however hopeful that the government’s bid to get more vaccines will be adequately supplied – “it’s up to pharmaceutical (companies) to deliver.”
Abenoja said another factor for the revised BOP is the scaling down of domestic growth prospects. The GDP growth projection has been reduced to 4-5 percent for 2021 from a previous projection of 6-7 percent.
The mobility restrictions due to the more transmissible COVID-19 Delta variant will impact growth while the supply and logistical issues in vaccine administration will “render the achievement of herd immunity more elusive and delaying plans to further open economies.”
For 2022, Abenoja said the “global and domestic economic activities are expected to fare better with recovery more firmly underway on expectations of contained COVID-19 cases as most economies have inoculated a greater share of their population.”
With the narrower BOP surplus and the lower current account numbers due to the widening of the trade-in-goods deficit, the BSP is projecting “robust expansion” of goods exports which is expected to grow by 14 percent from the previous forecast of 10 percent. “Combined with an even stronger acceleration of goods imports by 20 percent (from 12 percent), both of which reflected the stronger-than-expected growth in the first half of 2021,” said the BSP. The services exports and imports are expected to contract by two percent and four percent this year – “driven by the larger than initially forecasted contraction of travel receipts, despite the steady growth in BPO revenues.”
The financial account is projected to post lower net outflows with the inflows of foreign direct investments of $7 billion and foreign portfolio investments of $4.3 billion for 2021. Additional government borrowings for anti-pandemic response will also boost the financial account of the BOP. As of end-June, the financial account is a surplus of $1.2 billion.
The BSP said the latest BOP assessment has some upside risks while downside risks “continue to build up underpinned by the emergence of highly transmissible variants of the COVID-19 virus.”
“The lingering uncertainty continue to cast a shadow on external sector prospects over the near term as the direction and duration of the pandemic remains little known,” said the BSP.