Forecast 2024 dollar surplus jumps to $1.6B

MANILA — The Philippine government now anticipates a bigger dollar surplus this year than previously projected on expectations of reduced outflows from a narrower trade gap and heavier foreign investment inflows.

Latest forecasts by the Bangko Sentral ng Pilipinas (BSP) released on Friday showed the country is expected to end 2024 with a balance of payments (BoP) surplus of $1.6 billion, higher than the previous projection of $700 million set last March.

The BoP summarizes an economy’s transactions with the rest of the world during a certain period.

A surplus arises when more foreign funds enter the economy against those that left, which may increase the country’s dollar resources used to pay for its foreign debts and meet import requirements. A BoP deficit, meanwhile, means the reverse happened.

The latest projected BoP surplus would boost the country’s dollar reserves at a time when the BSP is stepping into the foreign exchange market occasionally to defend the peso, which had been trading at 19-month lows amid a resurgent greenback.

READ: First time this year: BOP swings to surplus

The central bank also said the Philippines’ gross international reserves are now predicted to end 2024 at $104 billion, higher than the previous forecast of $103 billion.

The expectation of a larger BoP surplus this year was mainly based on the assumption that merchandise imports would grow 2 percent in 2024. Such growth is lower than the previous forecast of 4 percent, which was based on easing global commodity prices.

That, in turn, would moderate dollar outflows that stem from payments for inbound shipments of various goods. This, while net inflows from foreign direct investments (FDIs) are seen hitting $9.5 billion in 2024, greater than the $9 billion forecast in March.

Hot money inflow

At the same time, foreign portfolio investments, also known as “hot money” due to their flighty nature, were expected to yield a larger net inflow of $3.1 billion—more than twice the older prediction of $1.3 billion.

“Both FDIs and FPIs are projected to yield higher net inflows following strong first-quarter figures,” the BSP said in a statement.

“The same is reinforced by the ongoing operationalization of the implementing rules and regulations of key investment reforms aimed at providing a more conducive business environment in the country,” it added.

READ: PH seen to generate $700-M BOP windfall this year

For 2025, the BSP said it expects a BoP surplus of $1.5 billion, which would be a reversal from the previous projection of a $500-million deficit, also due to anticipation of a smaller trade gap.

“The emerging external outlook for 2024 and 2025 is mainly shaped by expectations of steady global economic expansion, with a broadly balanced set of risks to the global growth outlook, and resilient domestic demand for 2024 and 2025, supported in part by key structural reforms,” the BSP said.

”Against this backdrop, the emerging external outlook for 2024 and 2025 continues to take on a cautiously optimistic view relative to the previous projection exercise,” it added.

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