The Bangko Sentral ng Pilipinas revised upward the balance of payments projections this year to a surplus of $3.7 billion as of May from a deficit of $3.5 billion projected in November 2018.
The adjustment took into account the expected sustained strength of the domestic economy despite the downward revision in the global economic growth outlook.
BSP Deputy Governor Diwa Guinigundo said during the first-quarter BoP briefing Friday that other key considerations in the revised projections were the near-term moderation in the global trade outlook, expected decline in commodity prices, possible ratcheting up of trade tensions between the US and China, and the US Fed’s shift to “dovish” monetary policy stance.
Other factors were the uncertainties over Brexit developments, expected modest rebound in non-resident capital flows to emerging markets and the bright outlook of the domestic economy.
The country’s BoP position recorded a surplus of $3.8 billion in the first quarter 2019, a reversal of the $1.2-billion deficit in the same quarter last year.
The central bank attributed the turnaround to the higher net inflows (net borrowing by residents from the rest of the world) in the financial account, mainly on account of the reversal of portfolio investments to net inflows, as well as the increased net inflows in the other investment and direct investment accounts during the quarter.
The strong performance of the financial account during the quarter was bolstered by favorable investor sentiment attributed to the country’s solid macroeconomic fundamentals and firm economic growth prospects.
Meanwhile, the current account—one of the main components of the balance of payments—registered a deficit of $1.2 billion in the first quarter, markedly higher than the $335-million shortfall registered year-on-year, due to the widening gap in the trade-in-goods account, arising mainly from the continued expansion in imports of goods in support of the sustained growth of domestic economic activity.
“What we saw in the BoP for the first quarter and to some extent be carried over to 2019 and beyond actually captures the growing economy of the Philippines. We saw in many instances that the Philippine economy is one of the fastest-growing despite the (slower) 5.6-percent expansion in the first quarter,” Guinigundo said.
“The issue is, is the current account financeable? The BoP in the first quarter at surplus, we see the finance ability of the current account deficit. We will continue to grow...,” he said.
The latest forecast also showed the current account is expected to post a higher deficit of $10.1 billion this year, up from the previous assumption of the $8.4-billion gap in November 2018. The deficit is -2.8 percent of GDP, higher than -2.3 percent of GDP in the November forecast.
Remittances are expected to post a 3-percent growth this year, unchanged from the same forecast in November.
However, the BSP lowered the foreign direct investments net inflow target this year to $9 billion from the previous assumption of $10.2 billion. Hot money, on the other hand, is expected to post a net inflow of $4 billion this year, up from the $200-million net outflow from the previous estimate.