PHL BOP deficit seen worse than earlier thought for 2018

In Photo: A teller at a bank in Makati City handles peso and dollar bills on Thursday, a day after the local currency breached the 53 zone, a 12-year low. Also on Thursday, the Central Bank revised its projected balance of payments deficit, which is now seen as wider by $500 million than earlier thought. That means more dollars are expected to bleed out of the economy for this year

MORE dollars are expected to bleed out of the economy for this year, as the Bangko Sentral ng Pilipinas (BSP) announced late Thursday that it expected a bigger wound in the Philippines’s balance of payments (BoP) position for 2018.

The overall BoP position of the Philippines is now projected to incur a $1.5-billion deficit for 2018, revised from the earlier $1-billion deficit projection for 2018.

The BoP is the economic managers’ way of summarizing all the transactions of the Philippines with the rest of the world.

A surplus in BoP means more dollars went into the economy than the volume of outflows. A deficit, on the other hand, means the economy’s dollar earnings were not enough to cover for the dollar expenditures during a given period.

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The new projection is part of the government’s biannual exercise, reviewing and reassessing projections for the year to incorporate the latest available data and reflect recent and prospective economic developments, both domestic and global.

The last assessment was in December 2017.  The BSP was quick to say that the larger than earlier expected BoP deficit is “very manageable” and is only equivalent to -0.4 percent of the country’s GDP.

Broken down, most of the deficit for the year can be traced to higher imports for 2018.

The BSP said the current account is seen to post a higher deficit of $3.1 billion for 2018, equivalent to 0.9 percent of the country’s GDP. This is because of the projected wider trade deficit, as growth in imports largely outpaces exports growth.

Shipments of imported goods, in particular, are anticipated to gain further traction in 2018 following the momentum seen in the last quarter of 2017. These are expected to grow 11 percent, up from the December 2017 projection of 10 percent.

Meanwhile, the exports of goods is also to continue its recovery in 2018 with a growth of 10 percent, an improvement from the 9-percent growth assumption released in December 2017.

Economic managers have been saying that the negative BoP is a “small price to pay” in the country’s move toward aggressive infrastructure spending.

This BoP deficit due to imports will be temporary and will result in a higher productive capacity and a more sustainable growth for the economy in the medium term, government officials and international experts, such as those from the Asian Development Bank and the International Monetary Fund said.

The BoP is still expected to be cushioned by he steady inflows of overseas Filipino remittances, as well as business-process outsourcing and tourism receipts, the
BSP said.

On other fronts, projections bear positive news as the financial account is now expected to record a net inflow due to the anticipated higher net inflow of foreign direct investments (FDI) and lower net outflow in the other investments account.

Latest data from the BSP showed the country’s BoP position is already in $1.497 billion in deficit in the first four months of 2018 alone, a strong weakening from the mere $78-million BoP deficit in the same January-to-April period in 2017.

The Philippines ended last year with an overall BoP position of $863 million in deficit.

 

Image Credits: Nonie Reyes

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Bianca Cuaresma graduated cum laude from the University of Santo Tomas (UST) with a degree in AB Journalism. She was with the BusinessMirror during her internship in 2012 where she was assigned at the Department of Foreign Affairs (DFA) beat. She continued to be of service to the paper after she graduated in 2013. In 2014, she was awarded as the Reporter of the Year by the paper for her coverage in the Bangko Sentral ng Pilipinas (BSP). She is a BusinessMirror reporter for 3 years now, and has covered general assignments and agencies related to banking and finance in the country.