The Central bank has revised its external payments forecasts for the year to show a sharp reduction in investments expected to enter the country, reflecting tumultuous financial market conditions that would keep foreign money stuck in safer havens.
Traditional sources of foreign income, however, are expected to stay strong as migrants continue to send money by the billions to their families at home and as the local outsourcing industry sustain its boom.
Exports are likewise expected to stay strong, but the country’s trade gap would likely widen given the need for higher imports by manufacturers and the government amid reconstruction efforts in Visayas.
“New forecasts are essentially based on the most recent outlook of trading partners (and) bouts of volatility in global financial markets,” BSP Governor Amando M. Tetangco Jr. told reporters.
For 2014, the country is now expected to post a balance-of-payments (BOP) surplus of $1.1 billion, or the equivalent of 0.3 percent of gross domestic product (GDP). The original forecast was a surplus of $3 billion.
The BOP position is a summary of the money spent by the country on things such as debt payments and imports versus money the country made from abroad through exports and entry of cash in the form of remittances, among others. A surplus means more money will come into the country than go out.
Other components of the BOP were also revised. Chief of them was the current account, which is the summary of all the country’s sources of recurring income, namely remittances, external trade and revenues by the outsourcing and tourism sectors, among others.
By the end of the year, the country is expected to end the year with a current-account surplus of $6 billion, lower than the previous projection of $10.4 billion and last year’s $9.4 billion.
The lower surplus reflects higher imports, now expected to grow at 9 percent, versus the projected growth of exports of 6 percent. “(The increase in imports is from) the requirements of domestic companies, particularly electronics, and reconstruction efforts,” Tetangco said.
Remittances are still expected to grow at 5 percent to a record high $24 billion by the end of this year.
Short-term foreign portfolio and longer-term direct investments are also expected to come in at a surplus, but lower than first projected. Portfolio investments, or placements in local stocks and bonds, are expected to reach $1.5 billion, net of outflows. Direct investments are seen at a net inflow of $1 billion. Paolo G. Montecillo