The country’s overall balance of payments (BOP) position will likely post a deficit of $4.3 billion from a surplus of $0.7 billion, according to the Monetary Board-approved 2022 and 2023 projections.
The current set of BOP projections incorporates latest available data as well as recent emerging developments.
The Monetary Board said 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,” the Board 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.”
The Board said that the push for the full reopening of the economy this year alongside the continued purposeful rollout of vaccination efforts, which now extends to the younger population “are also expected to boost overall business climate.”
“In addition, the passage and implementation of major structural reforms, particularly the CREATE Law and FIST Act, should help expand opportunities in the external sector. The expected passage of the amendments to the Public Services Act, which will allow greater foreign ownership in telecommunications, airlines and railways, could also herald increased foreign investments and competition in these industries,” the Board said.
Against this backdrop, the emerging 2022 overall BOP position is seen to reverse to a deficit of $4.3 billion or -1.0 percent of GDP, from a surplus of $0.7 billion or 0.2 percent of GDP in the December 2021 projection.
This is seen to be driven by the significant increase in the current account deficit for 2022 of $16.3 billion (-3.8 percent of GDP) from $9.9 billion (-2.3 percent) on the back of the further widening of the trade gap.
“This reflects the projected acceleration of goods imports by more than twice the growth rate of goods exports at 15.0 percent and 7.0 percent, respectively, amid improving domestic demand as well as surge in international oil prices,” the Board said.
On the other hand, both services exports and services imports are expected to post double digit growth rates this year of 11.0 percent and 12.0 percent, respectively. This follows the marked upgrades in the growth forecasts for both tourism revenues and BPO receipts given expectations of full reopening of the economy starting this year.
The forecast on cash remittances from overseas Filipinos (OF) is retained at 4.0 percent in line with its long-term growth trend. Other key factors supporting the forecast are the renewed demand for OFWs abroad as host economies open up to foreign workers, increased use of digital money transfers, as well as the embedded altruistic motives behind the remittance behavior of OFs.
BOP posted a deficit of $157 million in February 2022, significantly lower than the $2.02 billion BOP deficit recorded in the same month last year.
The BOP deficit in February 2022 reflected outflows arising mainly from the National Government’s (NG) foreign currency withdrawals from its deposits with the BSP as the NG paid for its various expenditures and settled its foreign currency debt obligations.
