The country’s balance of payments (BOP) outlook, currently projected to remain in surplus this year and in 2025, will be revised next week to account for geopolitical risks and expected restrictive US trade policies under the incoming Trump administration, according to a central bank official.
“What I can say is there’s a lot of trade conflict going on in the global economy. A lot of protectionist actions by countries. This can affect the balance of payment outlook in the Philippines,” said BSP Senior Director Redentor Paolo M. Alegre Jr. of the Department of Economic Statistics. Alegre reviewed the third quarter and nine-month BOP on Friday, Dec. 13, but postponed announcing the revised forecasts for the BOP for 2024 and 2025 until Thursday or Friday next week.
Alegre noted another factor to consider when calculating the BOP projection is the still “unresolved geopolitical risks in the Middle East, which can also influence oil prices.”
“All these elements are being factored into our projections for the BOP next year,” he stated.
Additionally, the BSP official said that the exchange rate and the recent peso depreciation to the P58 to P59 range against the US dollar is another concern in forecasting external accounts.
“We also consider the effects of the foreign exchange in our outlook because a weaker peso means imports are more expensive for us. It can be a factor,” said Alegre.
The peso averaged P57 in the first nine months, weaker than P55.49 during the same period in 2023. In the third quarter, the peso averaged P57.25, compared to P57.80 in the second quarter.
The BSP will release its forecasts for the 2024 and 2025 BOP next week, following approval of the proposed new projections by the Monetary Board. The Board will convene on Thursday, Dec. 19, for its last policy meeting of the year, with another meeting likely to discuss the BOP projections.
Alegre stated they need more information before finalizing their BOP forecasts.
The BOP summarizes a country's economic transactions with the rest of the world over a specific period. A BOP surplus indicates that exports or inflows exceed imports or outflows, while a deficit indicates the opposite.
“We’d like to capture the latest information as much as we can to create a more comprehensive BOP outlook. We want more information incorporated in our forecasts,” he added.
The last time the BSP revised the BOP forecasts was in September this year. For 2024, the BSP anticipates the BOP surplus will settle at $2.3 billion, driven by sustained funds and capital flows, global growth, increased trade, and lower inflation. This is an increase from its previous June estimate of $1.6 billion.
For 2025, the BOP surplus may decrease to $1.7 billion. As of the end of October this year, the Philippines’ BOP surplus stood at $4.393 billion, down from $5.117 billion at the end of September after the government settled its maturing foreign debts during that period.
Alegre presented a review of the third quarter BOP and the January to September BOP. For both periods, the BOP position showed surpluses. “The surplus was driven by net inflows in the financial account, reflecting investor confidence in the economy’s resilience despite global uncertainties,” he noted.
He also observed that the current account continues to register a deficit amid strong imports of goods to support expanding domestic economic activity. “We’re importing a lot of iron for our Build, Build, Build projects to create capacity and grow even more,” Alegre said.
The BSP also continues to maintain a healthy international reserves position that is sufficiently adequate to finance the country’s imports and debt servicing needs, he added. As of the end of November, the country’s gross international reserves amounted to $108.465 billion, lower than the $111.083 billion at the end of October.
In first three quarters of 2024, the BOP surplus was maintained due to the higher net inflows from the financial account, according to Alegre.
As of end-September, the current account deficit rose to $12.9 billion compared to $10.8 billion deficit in 2023.
The capital account, on the other hand, registered net receipts amounting to $54 million from $46 million last year while the financial account went up to $20.8 billion net inflows versus $8.2 billion net inflows in 2023.