Stock broker SB Equities Inc. expects the country’s currency reserve to dip to $100 billion by the end of next year as a result of a continued decline in the balance of payment (BOP).
This follows after it was reported that the nine-month BOP was a deficit of $665 million, a sharp reversal from the 2020 figures of $6.9 billion surplus as the current accounts dipped to a $2.6 billion deficit compared to a $7.8 billion surplus last year.
“In October, (the) BOP recorded a $1.1 billion surplus, allowing its 10-month level to revert to a surplus at $476 million, which is substantially less than the 10 months 2020’s surplus of $10.3 billion,” SB Equities said.
SB Equities noted that this led to the Bangko Sentral ng Pilipinas (BSP) announcing late last week that it has revised downward its 2021 BOP surplus projections to $1.6 billion, compared to the previous $4.1 billion, while next year’s BOP will be at $700 million, down from the $1.7 billion prior projection.
“This is in part a result of the central bank reversing its FY21 current account forecast to a deficit of $4 billion from a surplus of $3.5 billion and raising its 2022 current account deficit projection to $9.9 billion from $1.4 billion,” it said.
“We continue to expect current account deficits near term on the back of ongoing trade deficits,” SB Equities added.
SB Equities said there is a possibility for the gross international reserve (GIR) to end lower than its 2020 record-high of $110.1 billion, with the November figure now at $107.7 billion.
“We still think GIR is adequate since the end-November amount is equivalent to 10.2 months import cover and 8.7x/5.7x short-term external debt cover based on original/residual maturity. BSP lowered its end-2021 and 2022 GIR projections by $3 billion each at $111 billion and $112 billion, respectively,” SB Equitie said.
“We expect further GIR reduction with in-house’s end- FY22 forecast at $100 billion on a continual decline in BOP,” it added.
The BSP’s forecast for 2021 GIR stands at $114 billion and will go down to $111 billion next year.
