The Bangko Sentral ng Pilipinas said Friday it revised downward its 2023 balance of payments forecast to a deficit of $1.6 billion from its previous assumption of $5.4-billion shortfall, as the external sector is expected to register modest improvements in the months ahead.
The latest BOP forecast is equivalent to around -0.4 percent of gross domestic product, better than the -1.3 percent in the previous assumption. For 2024, the BOP deficit is expected to continue to decline to $0.5 billion.
The Monetary Board approved the new set of 2023 and 2024 balance of payments projections during its March 16, 2023 meeting that incorporated the latest available data and recent emerging developments.
“The emerging BOP forecasts for 2023 and 2024 are underpinned by expectations of subdued global and domestic economic activity this year followed by slightly improved activity by next year. Global growth prospects in 2023 will continue to be weighed down by broadly the same set of forces and risk factors highlighted in the December 2022 BOP projection exercise,” the BSP said.
It said the persistent high inflation, the protracted Ukraine-Russia conflict and pandemic-related legacies remained the key risks to the country’s external sector outlook, albeit with lesser adverse impact relative to previous estimates based on the October 2022 IMF World Economic Outlook.
“For 2023, the external sector is seen to register modest improvements relative to the December 2022 forecast round. This is driven mainly by the better than earlier anticipated actual data for key BOP accounts. These include latest data on the foreign direct investments, business process outsourcing, and the tourism and travel-related accounts,” it said.
It said the sustained remittance inflows from overseas Filipinos, driven by renewed demand from OF-destination countries, would support the BOP outlook.
Gross international reserves are expected to reach $100 billion this year, higher than the previous forecast of $93 billion. This is expected to increase further to $102 billion next year.
Remittances, however, are seen to grow slower by 3 percent this year and in 2024 compared to the previous assumption of 4-percent growth.
“The recent reopening of China’s economy could likewise yield positive cross-border spillovers from resumption of international business and travel as well as a pickup in Chinese consumer spending, which could in turn revitalize demand for Philippine export products and services,” the BSP said.
The BSP said it continued to emphasize limitations to the forecasts, particularly given continued buildup of external challenges.
“The BSP will continue to closely monitor emerging external sector developments and risks and how these may impact the BSP’s fulfillment of its price and financial stability objectives,” it said.
BOP is the difference in total value between payments into and out of a country over a period.
The BOP posted a deficit of $7.3 billion in 2022, a reversal from the $1.3-billion surplus recorded in 2021.