The build up of dollars in the Philippines—due mainly to the government’s increasing foreign loans and an economic contraction-induced decline in imports —will be bigger than earlier projected, but next year’s surplus will be substantially smaller, according to the central bank.
In a press briefing, officials of the Bangko Sentral ng Pilipinas (BSP) said the balance of payments account, which measures the total amount of dollars a country earns versus what it spends, would likely end 2020 at a surplus of $12.8 billion, equivalent to 3.4 percent of gross domestic product.
This is 58 percent more than the $8.1-billion projected surplus that the central bank’s Monetary Board approved last September.
“This reflects largely the $10.3 billion overall balance of payments position in the first 10 months of the year supported by higher foreign borrowings by the national government as well as lower merchandise trade deficit,” the agency said in a statement.
“For 2021, the major balance of payments accounts are expected to show continued improvements but could still remain below prepandemic levels,” the BSP added, saying that the overall dollar flows position was projected at a surplus of $3.3 billion next year, attributed mainly to the expected moderation of the current account surplus during the period.
This latest projection represents a slight narrowing of the surplus compared to the Monetary Board’s 2021 forecast of $3.4 billion in net inflows, approved last September.
“While the revised set of balance of payments projections are anchored on a narrative of a gradual ascent from the trough of the COVID-19 impact and improved market confidence following positive vaccine news, downside risks remain,” the central bank said.
Among the major risk factors are the possible reimposition of strict lockdowns among the country’s major trading partners, as well as the potential economic implications of the unprecedented global debt accumulation and adoption of exit measures from massive financial stimulus.
Overall, the latest balance of payments assessment for 2020 reflects the apparent bottoming out of the COVID-19 pandemic’s impact in the second quarter of 2020.
The central bank noted that while recent external account figures remained below prepandemic trend and still in the negative territory, these were expected to improve from the first half of the year.
The current account—which measures the country’s trade with foreign parties—is seen to post a surplus of $8.4 billion or 2.3 percent of GDP (gross domestic product) in 2020, reflecting in part the estimated narrower trade-in-goods deficit.
Exports are projected to contract by 14 percent, following better external demand outturn in the third quarter of 2020, while imports are expected to decline by 21.5 percent weighed down by lower world oil prices and tepid recovery in domestic economic activity.
Services exports are seen to decline by 21.4 percent in 2020 on account of the expected steeper decline in travel receipts as the tourism industry continue to take a hit from the pandemic, and the downward revision in the growth of the IT-BPO industry following the lower than anticipated revenue turnout in the first half of 2020. INQ