The BSP released today its latest set of balance of payments (BOP) projections for 2017 and the outlook for 2018. The latest 2017 forecast figures revised those released in June 2017. These updated projections incorporate the latest available data and reflect recent and prospective economic developments, both domestic and global.

BOP projections for 2017

The overall BOP position for 2017 is seen to post a higher-than-expected deficit of US$1.4 billion. This is due to the projected greater net outflow in the financial account, even as the current account is expected to show a lower deficit.

The current account is seen to post a deficit of US$0.1 billion, lower than the previous projection of US$0.6 billion, to reflect the improvement in the trade balance. This deficit represents less than 0.1 percent of gross domestic product (GDP). Exports of goods are projected to recover with a growth of 11.0 percent, an upward adjustment from the 5.0 percent growth assumption in the June 2017 projection exercise. This reflects the firm recovery in the global economy that has led to increased trade momentum since the second half of 2016 carrying on to 2017. Meanwhile, the growth forecast for imported goods is retained at a robust rate of 10.0 percent supported by the moderate increase in commodity prices and increased imports of raw materials, capital goods and consumer goods, in line with sustained strong domestic demand. The better-than-initially expected current account also draws support from the continued expansion in overseas Filipino (OF) remittances as well as business process outsourcing (BPO) and tourism receipts.

The financial account in 2017 is expected to reverse to a net outflow reflective of the anticipated higher net outflow of foreign portfolio investments following possible series of rate hikes by the US Federal Reserve as well as the higher-than-expected prepayments done by both the public and private sectors.

As a result, year-end gross international reserves (GIR) are anticipated to settle at around US$80.7 billion from US$80.5 billion in the previous projection exercise. The GIR level remains ample, covering more than eight (8) months' worth of imports of goods and payments of services and income.

BOP outlook for 2018

The projected overall BOP position in 2018 is seen to post a lower deficit of US$1.0 billion brought about by the expected reversal to a small net inflow in the financial account compared to the revised forecast in 2017.

The 2018 current account deficit is seen to widen to US$0.7 billion due mainly to the expected faster rate of growth in imports of goods compared to exports of goods in 2018, notwithstanding increases in the services and secondary income accounts. The current account deficit is deemed manageable as it constitutes only 0.2 percent of GDP. Goods exports are projected to grow by 9.0 percent due partly to some base effects. This also takes into account the assessment that the pace of Chinese economic growth could moderate progressively in 2018 and beyond. Nonetheless, exports are seen to continue receiving a boost from broad-based economic recovery in both advanced and emerging market economies. Similarly, shipments of imported goods are expected to continue to grow by 10.0 percent propelled by higher Philippine GDP growth prospects for 2018, likely rise in crude oil and commodity prices, and the expected increase in imports of raw materials and manufactured goods, with the latter gaining from increased government investments in infrastructure consistent with its Build, Build, Build program. Inflows from OF remittances, BPO and tourism receipts are seen to continue in 2018.

The financial account in 2018 is seen to reverse to a small net inflow on account of increased foreign direct investments (FDIs) as well as the anticipated lower net outflow in the foreign portfolio investments account. The expected increase in FDIs to US$8.2 billion in 2018 is in line with the sustained positive developments in the domestic economy, the expected improvement in global economic conditions relative to 2017, as well as the continued thrust toward fast-tracking and modernizing the country's infrastructure. Meanwhile, the anticipated lower net repayment by residents abroad reflects the lower level of foreign obligations that could be prepaid even with some penalties.

The year-end GIR level is projected to reach around US$80.0 billion, which remains ample to cover more than seven (7) months' worth of imports of goods and payments of services and income.

Source: Bangko Sentral ng Pilipinas (BSP)