BSP trims ’23 BOP deficit forecast to $1.2B

MANILA  -The country’s balance of payments (BOP) in 2023 is now expected to settle at a narrower deficit of $1.2 billion from the $1.6 billion forecast three months ago, amid slower activities worldwide, according to the Bangko Sentral ng Pilipinas (BSP).

Sittie Hannisha Butocan, director of the BSP’s economic research department, said in a briefing that the updated forecast “reflects mainly the slightly weaker global growth outlook.”

In particular, the Philippines’ trade deficit will be narrower this year as both exports and imports decline amid decreasing commodity prices.

Data at the Philippine Statistics Authority pegged the 2022 trade deficit at $58.3 billion, having ballooned by 38 percent from $42.2 billion in the previous year.

In 2022, imports surged by 17.3 percent while exports grew by 5.6 percent.

PH trade deficit shrank 14.9% in April, says PSA

At a meeting of the Monetary Board held June 16, the BSP maintained its forecast of a 6-percent increase in exports and an 8-percent rise in imports.

Butocan added that the deficit in the Philippines’ transactions with the rest of the world will be narrower thanks to sustained growth in travel receipts and income from business process outsourcing (BPO) in the wake of improvements in physical mobility and mobile technology.

Also, the growth in remittances from overseas-based Filipinos is expected to be supported by steady demand for Filipino workers amid a labor shortage in destination countries.

OFW remittances up 3.8% in April

Further, foreign direct investments (FDI) will continue to post net inflows, but this will be lower given the dampened investor sentiment in light of external headwinds.

The BSP also stuck to its forecast of a 9-percent rise in BPO revenues, 50-percent surge in tourism revenues, and a 3-percent increase in remittances.

In addition, the expected full-year net inflow of FDI was reduced to $11 billion from the $12 billion forecast last March.

Foreign investments flow into PH down by a third in March

The BSP said in a statement that while some upside risks to their forecasts have been identified—particularly that of China’s economic reopening, the unwinding of supply-side disruptions, and decelerating inflation—downside risks continue to dominate the global and trade outlook particularly in the near term.

“Weak external demand is likely to continue as uncertainties have been amplified by overseas financial system woes in recent months,” the central bank said. “These developments continue to weigh on the trade and investment prospects in emerging market economies, including the Philippines.”

The regulator said that even as the domestic economy sustained its robust recovery from the pandemic, the spillover effects from the global economic slowdown can be a major drag.

“Nonetheless, the BSP remains vigilant and stands ready for any necessary policy action to support its stabilization function and, in turn, help engender continued resilience of the domestic economy,” it added.