Despite persistent geopolitical, trade, and global financial risks, the Bangko Sentral ng Pilipinas (BSP) has raised its balance of payments (BOP) surplus projection for 2025 to $2.1 billion from its previous estimate of $1.7 billion.
The BSP also revised its surplus forecast for 2024 to $3.5 billion, higher than the $2.3 billion announced in September. The 2024 BOP results have yet to be released.
The latest BOP projections, released on Friday, Jan. 3, were approved by the Monetary Board, the BSP’s policy-making arm, on Dec. 23.
The BSP said the country’s BOP outlook “remains resilient, albeit downside risks dominate.” As of end of November 2024, the BOP surplus was $2.117 billion, lower than the $4.393 billion surplus at the end of October.
Positive factors contributing to the improved projections include stable yet moderating global and domestic economic growth prospects; a slowing inflation trajectory across jurisdictions; and possible shifts in US trade and investment policies under the incoming Trump administration. Lingering geopolitical and weather shocks, however, pose ongoing challenges.
The central bank said global growth was moderate in 2024 compared to 2023 but will remain on a steady trajectory in 2025 due to advanced economies’ expansion.
“Inflation is also seen to further decelerate worldwide, triggering possible move towards less restrictive monetary policy by central banks. However, heightened uncertainty emanating from lingering geopolitical and trade tensions, limited fiscal space, financial market volatilities, as well as climate-related threats continue to pose risks to the global growth outlook,” the BSP said.
Domestically, the BSP noted that the Philippine economy will likely achieve the lower end of the government’s six percent to 6.5 percent growth target for 2024, despite easing inflation, lower oil prices, and the national budget’s timely enactment.
Ongoing infrastructure projects and an improving business environment are expected to boost growth and the BOP position in 2025. The government expects gross domestic product (GDP) to grow by six percent to eight percent in 2025.
The BOP is a summary of the economic transactions of a country with the rest of the world for a specific period. A BOP surplus means there are more exports or inflows than imports or outflows, while a deficit is the opposite.
The latest BOP projection for 2024 is equivalent to 0.8 percent of the country's GDP, and the 2025 forecast is about 0.4 percent.
Based on the latest external accounts assessment, the current account, a component of the BOP, is expected to show higher deficits in both 2024 and 2025. The current account covers trade in goods, services, primary income, and secondary income.
The current account deficit is projected to be $12.1 billion in 2025, compared to the revised forecast of $10.4 billion for 2024. Previous estimates were $6.8 billion deficit for 2024 and $5.5 billion in 2025. As of the end of September 2024, the current account reported a shortfall of $12.9 billion.
The BSP has lowered its growth forecasts for both goods and services exports in 2024 and 2025, affecting the current account estimates. For 2024, the BSP revised its goods exports growth forecast to $56.5 billion from $57.6 billion, and to $58.8 billion in 2025 from $61.1 billion. Goods imports growth forecasts were unchanged at $123.7 billion for 2024 and $129.9 billion for 2025.
The forecast for services exports—mainly revenue flows from the business process outsourcing (BPO) sector—were also revised lower to $52.2 billion from $54.6 billion for 2024 and to $57.4 billion from $60 billion for 2025. The growth forecast for services imports was increased to $35.2 billion for 2024 and $38.1 billion for 2025.
The BSP said, “expectations of softer global demand amid tight monetary conditions, post-pandemic fiscal consolidation, as well as larger trade barriers and increased uncertainty from President-elect Trump’s announced policies also continue to weigh down the near-term prospects for goods exports.”
The BSP forecasts travel receipts will grow slower in 2024 and 2025. The latest estimates for travel receipts are $10.5 billion for 2024 and $12.6 billion for 2025, lower than previous forecasts of $12.8 billion and $14 billion, respectively.
BPO revenues are expected to reach $31.2 billion in 2024 and improve to $33 billion in 2025. The previous September forecasts were $31.4 billion for 2024 and $33.6 billion for 2025.
The BSP noted that the balance of risks to the BOP outlook is broadly tilted to the downside due to global growth uncertainties.
“Aside from expectations of moderating global and domestic economic activity, other downside risks to the external outlook include volatility in commodity prices due to lingering geopolitical and trade tensions; slower-than-expected growth in China; domestic constraints in the broader use of artificial intelligence (AI); and possible mobility risks due to weather-related events and the emergence of highly infectious diseases,” the BSP said.