The Bangko Sentral ng Pilipinas said Wednesday it expects higher balance of payments surplus and gross international reserves for 2020 and 2021 on the expected recovery of the global economy from the impact of the COVID-19 pandemic.
BSP Governor Benjamin Diokno said in a message to reporters Wednesday the Monetary Board approved the upward revision to the BOP surplus to $8.1 billion, representing 2.2 percent of the gross domestic product in 2020, from the previous estimate of $600 million (0.2 percent of GDP) surplus.
“The new set of forecasts takes into account the latest available BOP data for the first half of 2020 as well as recent global and domestic economic developments, including the macroeconomic impact of the pandemic,” Diokno said.
He said the global economy was showing signs of recovery but remaining susceptible to setbacks, while the domestic economy was slowly lifting its way out of containment measures.
The BSP revised the 2020 current account forecast to a surplus of $6 billion from the previous estimate of $1.9-billion deficit.
This was attributed to the expected narrower trade-in-goods deficit, on broad-based contraction in both goods exports (-16 percent) and imports (-20 percent), with the latter declining at a faster rate due to weaker domestic demand.
The current account surplus is also supported by the lower expected contraction in overseas Filipino remittances of 2 percent from the previous estimate of 5 percent, following the strong rebound in June and July as host economies started to reopen.
Export revenues from the business process outsourcing are seen to grow by 2 percent (unchanged from the previous forecast) as the sector managed to overcome logistical bottlenecks and operational adjustments.
Both foreign direct investments and foreign portfolio investments are seen to post net inflows in 2020, amounting to $5.6 billion (revised upward from $4.1 billion) and $2.4 billion (unchanged), respectively.
Diokno said while uncertainties continued to weigh down on business and investor confidence, factors such as expectations of a better-than-initially-anticipated global economic performance for the year, the reopening of advanced economies with investment interests in the Philippines, the country’s investment-grade credit standing and the expected gradual economic recovery were seen to support foreign investment inflows for the rest of the year.
Meanwhile, the end-2020 GIR level is expected to reach $100 billion, on increased foreign borrowings by the national government and the revaluation adjustments arising from the accounting treatment of the BSP’s gold holdings.
The BOP position is seen to remain in surplus in 2021, but at a lower level of $3.4 billion or 0.9 percent of GDP, reflecting the lower forecasted current account surplus for 2021 of $3.1 billion (0.8 percent of GDP) amid an expected widening of trade deficit.
“The external sector outlook for 2021 reflects more favorable growth prospects as the global economy proceeds from an earlier restart of economic activity in the second half of 2020,” Diokno said.
The 2021 GIR level is seen to reach $102 billion in anticipation of continued national government foreign currency deposits and positive revaluation adjustments in gold holdings as gold prices could remain elevated next year due to safe-haven investor demand.