BANGKO Sentral ng Pilipinas revised downward the balance of payments surplus target this year to $500 million from the previous assumption of $2 billion due to the lower global growth outlook and uncertainty in the US Federal Reserve policy tightening.
Bangko Sentral Deputy Governor Diwa Guinigundo said in a briefing Friday the central bank also considered the possible impact of US President Donald Trump’s policies on the global trade, reduced concerns on China’s near-term prospects, gradual recovery in oil prices and favorable domestic growth prospects.
Latest data from Bangko Sentral showed that the BoP surplus in the first 10 months declined to $1.46 billion from $1.64 billion. The BoP surplus is expected to improve to $1 billion in 2017.
“The last quarter of 2016 is particularly challenging. There are lots of unexpected developments in the financial markets… some are unexpected. That is why there are region-wide depreciation in currencies,” Guinigundo said.
Current account, which is one of the major components of the balance of payments, is now expected to reach a surplus of $2.5 billion, significantly lower than the previous target of $5.8 billion for the year.
The balance of payments summarizes the country’s economic transactions with the rest of the world, with a deficit indicating foreign exchange payments outstripping receipts and a surplus the reverse.
Persistent surpluses help build up the country’s gross international reserves, an ample supply of which helps prop up the peso vis-à-vis the US dollar and keep domestic inflation at bay.
However, foreign direct investments are expected to post a higher net inflow of $6.7 billion, higher than the previous target of $6.3 billion. FDI net inflow as of the first nine months stood at $5.9 billion.
Registered foreign portfolio investments or hot money are expected to post a net outflow of $1.1 billion this year, the same target made in May 2016.
The BSP also reduced the gross international reserves target to $83.7 billion from the $84.8-billion assumption made in May this year.
Remittances from migrant Filipino workers are expected to slightly decline to $26.6 billion, from $26.8 billion or a 4 percent growth over 2015. Remittances are expected to grow to $27.7 billion next year.