MANILA, Philippines–The Philippines is expected to make a turnaround this year, earning more money from overseas than it spends as investments flood in and structural flows such as remittances and revenues from certain industries hold up.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said a comfortable balance-of-payments (BOP) surplus was projected for this year, reversing last year’s deficit.
“Even as we continue to reassess our BOP projections for 2015 and 2016, the current trends point to at least a $1-billion surplus,” he told reporters this week.
This follows the release of data on the country’s $244-million BOP deficit in March, reversing the surplus recorded in the previous three months. The deficit in March brought the Philippine economy’s year-to-date deficit to $877 million.
BOP is a summary of all the business the country does with the rest of the world. A surplus means more money entered, rather than left, the country. A deficit means the opposite.
Sources of income for the country include remittances from overseas Filipino workers, income from exports of goods and services, foreign investments and revenues from certain industries such as tourism and business process outsourcing.
Meanwhile, the country uses the dollars it earns on the importation of goods, such as food and fuel, and the payment of foreign debt. Divestments made by foreign investors are also counted as outflows.
BOP data is tracked closely to ensure that the supply of dollars in the economy remains ample enough to allow businesses and the government to transact with the rest of the world.
Last year, due to massive foreign divestments in January, the Philippines posted a BOP deficit of $2.88 billion—the first deficit since 2004.
Guinigundo said policymakers were more optimistic this year. He said the current account position, which counts only recurring forms of income such as remittances and trade revenues, would likely reach a surplus of $6.8 billion, based on forecasts made in October of 2014.
Meanwhile, capital and financial accounts, referring to investments in equity and debt securities, are expected to recover significantly from 2014’s external payments “bloodbath following large volatilities in the global financial markets in relation to the taper tantrum.”