The Monetary Board yesterday revised lower the projections for the country’s balance of payments (BOP) for this year and next, as a sharp contraction of both domestic and global economy is expected as COVID-19 woes continue.
Benjamin Diokno, Bangko Sentral ng Pilipinas (BSP) governor, said the “overall BOP levels in 2020 and 2021 are projected to sustain the current surplus trend, though at levels lower than prior to the COVID-19 pandemic.”
BOP as percentage of gross domestic product (GDP) will fall from 0.7 as of November 2019 to 0.2 as of May 2020 but is seen to increase to 0.6 by 2021.
The current account deficit as percentage of GDP will decrease from -2.1 as of November 2019 to -0.5 as of May 2020. It is expected to inch up to -4.4 by 2020.
Remittances from overseas Filipinos will likely contract by 5 percent to $28.6 billion, a reversal from the 3 percent growth in the November 2019 projection, due mainly to large repatriation of workers and major economic disruptions in host countries.
However, remittances will bounce back by 4 percent in 2021.
But Diokno stressed BPO receipts as percent of GDP is expected to grow all through 2020 and 2021.
It is expected to grow 2 percent in 2020, down from the November 2019 estimate of 5 percent; it is expected to bounce back to 4 percent in 2021.
Diokno said the reassessment “incorporates key developments during the first 4 months of 2020 and 2021 BOP outlook.”
“This include expectation of sharp contraction in both global and domestic economic activities in 2020, followed by a strong recovery in 2021; a shift toward increased monetary policy accommodation among central banks worldwide; and continued trade and political tensions, among others,” Diokno said in a statement.
The BOP is a statement of all transactions made between entities in one country and the rest of the world.
These transactions consist of imports and exports of goods, services and capital, as well as transfer payments, such as foreign aid and remittances.
Latest data showed the country’s overall BOP position posted a surplus of $1.67 billion in April 2020, higher than the $467 million BOP surplus recorded in the same month last year.
Diokno said the BOP surplus in April 2020 reflected mainly the inflows arising from the national government’s deposit with the BSP of its foreign loan proceeds as well as the BSP’s foreign exchange operations and income from its investments abroad.
“These inflows were partially offset, however, by the foreign currency withdrawals made by the national government to pay its foreign currency debt obligations during the month in review,” Diokno added.
The surplus in April 2020 brought the cumulative BOP position to a surplus of $1.6 billion in the first four months of the year, from a deficit of $68 million in January to March.
However, this level was lower than the $4.27 billion surplus recorded a year ago.
The BOP position reflects an all-time high final gross international reserves (GIR) level of $90.94 billion as of end-April 2020.
Diokno said at this level, the GIR represents an ample external liquidity buffer, which is equivalent to eight months’ worth of imports of goods and services and payments of primary income.
It is also about 5.5 times the country’s short-term external debt based on original maturity and 4 times based on residual maturity. (J. Calapati)