The country’s overall balance of payments (BOP) is seen hitting a deficit of $1.6 billion this year, lower from the previous forecast of $5.4 billion, data released by the Monetary Board showed.
For 2024, the deficit is seen hitting $500 million.
“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,” the policymaking Monetary Board said.
The Monetary Board approved the new set of 2023 and 2024 balance of payments (BOP) projections during its meeting last week.
The current set of BOP projections incorporates latest available data and recent emerging developments.
“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 Monetary Board said.
“Persistent high inflation, the protracted Ukraine-Russia conflict, and pandemic-related legacies remain the key risks to the country’s external sector outlook, albeit with lesser adverse impact relative to previous estimate,” the Monetary Board added.
“Nevertheless, the impact of BSP monetary policy action and the restoration of inflation to a target-consistent path are seen to support business and consumer sentiment. Overall, however, the external outlook for the next two years is likely to remain subdued,” the Monetary Board said.
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 (FDIs), business process outsourcing (BPO), and the tourism and travel-related accounts. Sustained remittance inflows from overseas Filipinos (OFs), driven by renewed demand from OF-destination countries, is also seen to support the BOP outlook.
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.
From a trade perspective, possible gains from China’s recovery can soften the impact of a broader downturn in global demand on Philippine exports. Based on actual PSA data for 2022, China ranked as the third largest destination of Philippine exports with a share of 13.9 percent.
Significant progress in mobility conditions and easing travel protocols across jurisdictions are likely to further prop up travel and tourism-related activities as seen in the strong influx of foreign tourists to the Philippines, especially during the latter part of 2022.
In addition, the recent launch of the Philippine Development Plan 2023-2028 that highlighted the government’s strategies and programs as well as the ratification of the Regional Comprehensive Economic Partnership (RCEP) agreement are expected to bolster trade and investment prospects for the year. The deceleration in global fuel prices from its 2022 levels is also another key consideration coming into play in this forecast round.
