The Bangko Sentral ng Pilipinas on revised Friday its 2022 balance of payments projection to a deficit of $4.3 billion from the $0.7-billion surplus target made earlier, taking into account the uncertainties posed by global developments.
BSP’s Department of Economic Research managing director Zeno Ronald Abenoja, in an online briefing, cited a number of domestic and external factors for the downward adjustment of the BOP target.
“Key considerations are global developments and world GDP growth forecasts from the World Economic Outlook Report of the International Monetary Fund released January 2022 and the World Economic Prospects Monthly Report of Oxford Economics released on March 8, 2022,” Abenoja said.
Other factors considered were the country’s gross domestic product growth of 5.6 percent in 2021, lower actual BOP surplus last year of $1.3 billion, overall BOP position as of January 2022 of $102-million deficit and data on gross international reserves, tourist arrivals, cash remittances, OFW deployments and foreign portfolio investments.
Data showed the overall BOP position yielded a deficit of $157 million in February, reflecting outflows mainly from the government’s foreign currency withdrawals from deposits with the BSP. This brought the cumulative BOP level in the first two months to $259-million deficit.
“The assessment of the BOP outlook for 2022 and 2023 takes on a more guarded view as the ongoing Russia-Ukraine conflict complicates the global and domestic recovery picture, magnifying the disruptions and uncertainties caused by the pandemic. The heightened volatility in both international financial and commodity markets could spill over to the domestic economy of emerging market economies including the Philippines,” Abenoja said.
“Meanwhile, the direct economic linkages of the Philippines with Russia and Ukraine are limited. However, the conflict could negatively impact our major trading partners and present headwinds to the domestic economy,” he said.
The WEO report for January projected that global growth would moderate from 5.9 percent in 2021 to 4.4 percent in 2022―half a percentage point lower than in the October World Economic Outlook—largely reflecting forecast markdowns in the US and China.
Balance of payments is the difference in total value between payments into and out of a country over a period. For 2023, the BSP expects a narrower BOP deficit of $2.6 billion, as some improvements in global growth outlook are expected. The BOP posted a $1.3-billion surplus in 2021, down from the $16-billion surplus in 2020.
The 2022 BOP projection assumed that exports would rise this year by 7 percent, imports by 15 percent, and cash remittances by 4 percent.
Net foreign direct investments are seen to hit $11 billion in 2022, up from the $10.5-billion net inflows last year, while gross international reserves are seen to settle at $108 billion, almost unchanged from the $108.8-billion actual GIR in 2021.
“The emerging 2022 GIR is seen at $108 billion [8.4 months of import cover], lower than the previous forecast of $112 billion [9.2 months of import cover] reflecting latest trends. The 2022 GIR will be supported by foreign borrowings by the government as well as the potential augmentation in the volume of gold purchases,” Abenoja said.
The final gross international reserves level was broadly unchanged at $107.8 billion as of end-February from $107.69 billion in January.
The latest GIR level represents a more than adequate external liquidity buffer equivalent to 9.5 months’ worth of imports of goods and payments of services and primary income.
It is also about 7.1 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity.