revised forecasts of the balance of payments | Manila Times

The MONETARY AUTHORITIES have approved new balance of payments (BOP) forecasts for this year and next based on the latest data and new developments, Bangko Sentral ng Pilipinas (BSP) reported on Friday.

“Emerging balance of payments forecasts for 2023 and 2024 are underpinned by expectations of a slowdown in global and domestic economic activity this year, followed by a slight improvement in activity next year,” the central bank said in a statement.

The deficit forecast for 2023 was cut to $1.6 billion from $5.4 billion earlier, while the forecast for 2024 was set at $500 million. The central bank clarified that these forecasts are limited, especially given the continued escalation of external challenges.

Steady inflation and the impact of the Russo-Ukrainian war, among other factors highlighted in the December balance of payments outlook, are expected to continue dampening global growth prospects, “albeit with a smaller adverse impact than previous estimates.”

Robust demand has led to slightly better growth forecasts for major trading partners such as the US and the eurozone, BSP notes, while local inflation and slowing spending are likely to dampen economic activity.

Business and consumer sentiment is expected to be supported by monetary policy measures, but overall “the external outlook for the next two years is likely to remain subdued.”

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The “modest” growth this year is mainly due to stronger-than-expected data on foreign direct investment, business process outsourcing and travel-related bills, BSP said. The robust inflow of remittances also supports the latest forecasts.

Meanwhile, the opening of China could revive demand for Philippine goods and services and cushion the impact of lower global export demand.

The launch of the Philippine Development Plan 2023-2028 and the ratification of the Regional Comprehensive Economic Partnership could boost trade and investment, and declining global fuel prices are “also another key consideration to be factored into this outlook round,” BSP said in a statement.

However, downside risks remain, especially as monetary tightening continues. Renewed concerns about the health of the global banking sector could also contribute to volatility and lower demand.

For 2023, growth forecasts for imports and exports of goods were maintained at 4.0 percent and 3.0 percent, respectively, while growth forecasts for imports and exports of services were raised to 11 percent and 17 percent from 8.0 percent and 15 percent.

Outsourcing revenues are expected to grow by 9.0% from 5.0%, and travel revenues are expected to grow 80% slower than 150% previously.

In the meantime, remittances are projected to rise 3.0 percent from a December forecast of 4.0 percent, but gross international reserves are likely to exceed $100 billion instead of $93 billion.

As for 2024, the overall balance of payments position is projected to remain in deficit, albeit smaller than previously forecast, “in line with the normalization of global and domestic economic activity.”

Electronics and mineral products are expected to continue to drive exports in 2024 and over the medium term as global growth accelerates. At the same time, imports of goods will be supported by investment and improved production capacity.

A strong recovery in exports of high-value services is also expected.

Downside risks to the outlook include weaker global growth, a potential slowdown in China’s economic recovery, an escalating war between Ukraine and Russia, and increased financial market volatility, BSP said.

Growth forecasts for the year are 6.0 percent and 8.0 percent respectively for exports and imports of goods; 16.0 percent and 10.0 percent for exports and imports of services; 9.0 percent for outsourcing revenues; and 50 percent for travel receipts.

Growth in remittances is expected to remain steady at 3.0 percent, while GIR (Gross International Reserve) is projected at $102 billion.

The Philippines ended 2022 with a balance of payments deficit of $7.3 billion, compared to the previous year’s surplus of $1.3 billion.