The Monetary Board (MB) now expects the balance of payments (BOP) swinging to a deficit of $4.3 billion at end-2022, instead of easing to a surplus of $700 million as forecast in December 2021, mainly due to greater uncertainties in global developments.
The balance of currency flows in the Philippines settled at a surplus of $1.35 billion in 2021—when more dollars came in than left the economy—short of the $1.6-billion target and down from $16 billion in 2020.
The Bangko Sentral ng Pilipinas (BSP) said that the MB, which exercises the authority and functions of the BSP, on Friday announced that the latest assessment of the BOP outlook took on a more guarded view as the ongoing Russia-Ukraine conflict was complicating the global and domestic recovery situation, and magnifying the disruptions and uncertainties caused by the pandemic.
“The heightened volatility in both international financial and commodity markets could spill over to the domestic economy of emerging market economies including the Philippines,” said Zeno Ronald Abenoja, managing director of the BSP’s Department of Economic Research.
“Meanwhile, the direct economic linkages of the Philippines with Russia and Ukraine are limited,” Abenoja said in a media briefing. “However, the conflict could negatively impact our major trading partners and present headwinds to the domestic economy.”
The MB also took into account prospects for investments, remittances, and the business process outsourcing revenues, which they said remained vibrant while having been resilient in the past.
Further, the push for the full reopening of the economy this year alongside the continued purposeful rollout of vaccination efforts, which now extend to the younger population, are also expected to boost the overall business climate.
Abenoja said the latest BOP numbers were seen to be driven by the significant increase in the current account deficit for 2022 of $16.3 billion from $9.9 billion on the back of the further widening of the trade gap.
He said this reflected the projected acceleration of goods imports by more than twice the growth rate of goods exports at 15 percent and 7 percent, respectively. These are expected amid improving domestic demand as well as a surge in international oil prices.
In February alone, the BOP settled at a deficit of $157 million, which was significantly lower than the $2.02-billion deficit recorded in the same month of 2021.
According to the BSP, end-February reflected outflows arising mainly from the national government’s foreign currency withdrawals from its deposits with the BSP as it paid for its various expenditures and settled its foreign currency debt obligations.
As of Feb this year, the BOP was pegged at a deficit of $259 million, also significantly lower than the $2.77-billion deficit recorded in the same period last year.