The central bank expects a bigger balance of payments (BoP) surplus in 2020 after taking the latest government data, as well as emerging economic developments and outlook, into consideration.
In a virtual briefing on Friday, Zeno Ronald Abenoja, officer in charge of the Bangko Sentral ng Pilipinas’ (BSP) Monetary Policy Subsector, said the surplus was now projected at $12.8 billion this year, equivalent to 3.4 percent of the country’s gross domestic product (GDP).
“This reflects largely the $10.3-billion overall BoP position in the first 10 months of the year, supported by higher foreign borrowings by the national government, as well as [a] lower merchandise trade deficit; and inflows from foreign direct investments (FDI) [and] overseas Filipino (OF) remittances, as well as trade in services,” he explained.
The current account — a major component of the BoP — is seen to post an $8.4-billion surplus this year, equivalent to 2.3 percent of GDP, and higher than the $6 billion estimated earlier.
“In particular, [exports of goods] are expected to decline by 14 percent in 2020, improving slightly from the earlier-projected 16-percent contraction,” Abenoja said, adding that “this is driven by better external demand out during the third quarter.”
Imports of goods are seen to ease by 21.5 percent, dragged by lower global oil prices and the tepid recovery in domestic economic activity.
Service exports are forecast to fall by 21.4 percent on the anticipated steeper decline in travel receipts, as the tourism industry continues to reel from the coronavirus pandemic and reduced growth in the information technology-business process outsourcing industry after it posed lower-than-anticipated revenues in the first half.
“Meanwhile, the projected contraction in OF cash remittances is maintained at 2 percent, even as the year-to-date actual remittances improved with a lower contraction of 1.4 percent as of September 2020,” Abenoja said.
The financial account is projected to post net inflows of $3 billion, based on the programmed and projected foreign borrowings that the public and private sectors can avail themselves of, as well as the upward revision in expected inflows of FDI and foreign portfolio investments.
According to the BSP official, this year’s gross international reserves could hit $105 billion, equal to 11.6 months of import cover, after taking into account revaluation adjustments and increased foreign loans by the government in response to the pandemic, as well as to fund recovery-supportive infrastructure.
For 2021, the BSP sees the BoP surplus to shrink to $3.3 billion, or 0.8 percent of GDP.
“This considers the expected lower current-acount surplus next year amid the anticipated widening of the trade-in-goods deficit as imports expand amid better domestic demand prospects, and as the government catches up on its major infrastructure program,” Abenoja said.
The current account surplus is projected to contract to $6.1 billion, or 1.5 percent of GDP, in 2021.