BANGKO Sentral ng Pilipinas revised the country’s balance of payments position projection this year to a deficit of $500 million from the earlier assumption of a $1-billion surplus because of the subdued outlook for emerging market economies and the possible impact of the policies of US President Donald Trump.
The projected deficit is expected to result in gross international reserves of $80.5 billion in 2017, lower than the previous projection of $84.7 billion.
Deputy Governor Diwa Guinigundo said in a briefing Friday the monetary authorities also considered the upward revision of the global growth this year, recovery of the global trade, China growth outlook which could be at risk with high debt load, and the pace of the monetary policy tightening in the US in the new assumptions.
Guinigundo said global growth this year was seen at 3.5 percent, higher than 3.1 percent in 2016.
But he cited the firming of commodity prices and strong domestic growth prospects. “We hope that the numbers will continue to improve as the year unfolds, especially in the second half of the year,” Guinigundo said.
He said the positive global growth prospects could result in higher exports this year by $5 billion from the earlier assumption of $2 billion. The import growth, meanwhile, was maintained at $10 billion.
The BoP summarizes the country’s economic transactions with the rest of the world, with a deficit indicating that foreign exchange payments exceed inflows. A BoP deficit affects the value of the peso against the US dollar and eats into the country’s gross international reserves.
The BoP posted a deficit of $994 million in the first quarter 2017, higher than the $210 million gap a year ago. The current account reversed to a deficit of $318 million from a $730-million surplus a year ago, as the trade in goods deficit widened on the back of the faster growth in imports.
“Global economic growth remained uneven with slower expansion in the euro area, India, and the Asean region even as economic activity continued to pick up pace in the US, Japan, China,” Bangko Sentral said.
The BoP incurred a $420-million deficit in 2016, a sharp reversal of the $2.616-billion surplus in 2015. The end-December figure also missed the $500-million BoP surplus target set by Bangko Sentral.
Monetary authorities review the economic assumptions twice yearly in May and November.