BSP sees bigger dollar flow surplus in 2021

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Dollar flows into the Philippines from overseas will post a bigger surplus this year than initially expected as exports start to recover, but tepid economic activity will continue to constrain imports, according to the latest estimate of the central bank.

In an online briefing, officials of the Bangko Sentral ng Pilipinas (BSP) revised their latest estimated balance of payments (BOP) surplus for 2021 to $7.1 billion or 1.8 percent of gross domestic product (GDP).This is higher than the full -year projection of $6.2 billion set by the Monetary Board last March, but substantially lower than the record high $16-billion BOP surplus for the whole of last year, when the economic slump crimped imports and investments.

According to the central bank, the new forecast “is reflective of the upward revision in the current account to a surplus of $10 billion in 2021 from the previous projection of $9.1 billion.”

“The upward revision is supported by an anticipation of an accelerated recovery in goods exports by 10 percent from an initially projected growth of 8 percent amid expected quicker resumption in global economic activity during the year, as well as imports growth likely to gain momentum at 12 percent , which is unchanged from the previous exercise,” the BSP said.

BOP is the net tally of all dollar transactions made by the country’s economy with the rest of the world. A surplus means the economy is earning more dollars than it is spending, but may also mean it is not spending enough for imported raw and intermediate materials needed for growth. A deficit, on the other hand, means the country is spending more than it is earning.

According to the central bank, services exports and imports are seen to grow by 6 percent and 7 percent, respectively, in 2021, consistent with the foreseen improvements, albeit modest, in both travel and business process outsourcing receipts during the year.

Overseas Filipino cash remittances are seen to recover by 4 percent in 2021, unchanged from the previous projection. This is supported by expectations of improved labor mobility following rising vaccination levels in the country and in major overseas Filipino-destination countries, easing of travel restrictions and reopening of borders to foreign workers.

Meanwhile, the financial account is projected to post lower net outflows on the back of the expected higher foreign direct investments of $7.5 billion and foreign portfolio investments of $5.5 billion alongside foreign exchange inflows arising from the programmed borrowings of the government.

The emerging 2021 gross international reserve estimate is $115 billion, equivalent to 11.9 months of imports of goods and payments of services and primary income. This revised forecast is $1 billion higher than the March 2021 projection of $114 billion due to revaluation adjustments and projected sustained foreign borrowings by the national government in response to the COVID-19 pandemic and to aggressively fund recovery-supportive infrastructure.

In 2022, the overall balance of payments surplus is forecasted to settle lower than in 2021 at $2.7 billion equivalent to 0.6 percent of GDP, driven mainly by the anticipated narrower current account surplus of $6.7 billion, equivalent to 1.5 percent of GDP, for the year.

This outlook is hinged mainly on the projected sustained positive performance of both exports (expected to post 6 percent growth) and imports (with a growth of 10 percent) of goods as the more widespread vaccine rollout could lessen mobility issues and bottlenecks affecting supply chains.

Meanwhile, foreign direct and portfolio investments are projected to reach $8.5 billion and $7.4 billion, respectively, as the investment climate improves further.

The emerging dollar reserve level in 2022 is estimated to reach $117 billion in anticipation of continued national government foreign currency deposits to address the impact of the pandemic and to fast-track its infrastructure program. INQ