Monetary Board sees 2021 dollar surplus 87 percent higher than projected

MANILA, Philippines—The flow of dollars in and out of the Philippines was expected to show marked improvement this year, although the ongoing COVID-19 pandemic will likely keep capping imports for raw materials and intermediate goods well into 2022.

The latest data from the Bangko Sentral ng Pilipinas (BSP) showed that its policy-making Monetary Board now expects the country to end 2021 with a balance of payments surplus of $6.2 billion. This is 87 percent more than the $3.3 billion forecast for the year made by the group three months ago.

In 2020, the country ended the year with a dollar surplus of $16 billion—the highest in the country’s history—as spending for imports dropped sharply due to the biggest economic contraction experienced since the end of World War II.

Before the COVID-19 public health crisis, the country recorded a balance of payments surplus of only $7.8 billion in 2019.

In a mobile phone message to reporters, BSP Governor Benjamin Diokno said the Philippines’ external position for this year was “looking up”, with “both exports and imports growth improving.”

The balance of payments represents the net amount of dollars that flow in and out of a nation’s economy for a particular period. It tallies the movement of foreign exchange due to a country’s exports of goods and services, remittances from expatriate citizens, and investment inflows, among others, against outflows due to import spending, investment repatriations and other outflows.

A surplus means the country is making more dollars than it is spending and usually results in the local currency appreciating against other currencies, while the opposite is true in the case of a balance of payments deficit.

The latest forecasts approved by the Monetary Board also showed that the Philippines will likely end 2021 with $114 billion in dollar reserves. This is higher than the forecast of $106 billion made three months ago, and will set another record high from the historic peak of $110.1 billion in gross international reserves recorded at the end of 2020.

In 2019, the country ended the year with only $87.8 billion in dollar reserves.

These same Monetary Board-approved forecasts also showed that it expected the country’s current account — the tally of goods imports and exports, services, the business process outsourcing industry’s earnings, and travel receipts, among others — to end the year with a $9.1 billion surplus.

This is larger than the original forecast for 2021 of $6.1 billion, but smaller than last year’s tally of a $13 billion surplus.

TSB