BSP revises BOP 2015 forecast to $2 billion

MANILA, Philippines – The Philippine central bank has doubled its forecast for this year’s balance of payments (BOP) for a surplus of $2 billion, following the downward revision in international oil prices.

“This is due primarily to a sustained strong current account surplus following the downward revision in international oil prices,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.

The BOP summarizes an economy’s transactions with the rest of the world for a specified time period.

The revised projection reflects the central bank’s optimism that it could turn around the $2.9-billion deficit the Philippines incurred last year.

“The country’s external position remains a key source of resilience and policy flexibility that would enable the economy to ride out the volatilities of global economic and financial developments,” the BSP said.

Gross international reserves to rise around $82B

As a result, gross international reserves (GIR) this year are expected to be around $81.6 billion, an improvement from the $79.5 billion recorded in 2014.

“At this level, the GIR remains ample, covering 10 months’ worth of imports of goods and payments of services and income,” the central bank said.

The current account, which has been in surplus since 2003, is projected to post a surplus of $14.2 billion, accounting for 4.4% of gross domestic product (GDP).  The account is seen to be driven “by strong overseas Filipino remittances and robust receipts from business process outsourcing (BPO) and tourism.”

Goods exports are projected to rise by 5%, backed by the rosy outlook for electronics.

Meanwhile, goods imports are expected to inch up by 1%, driven mainly by the outlook in domestic activity, even as the downward adjustment in the oil price assumption resulted in a lower import bill.

The balance of the financial account is expected to post a lower outflow of $8.4 billion from $10.1 billion recorded in 2014.

Hot money net inflow expected

While the global financial environment is expected to remain volatile, the continued bullish business confidence is seen to support higher foreign direct investments (FDI) and modest inflows in portfolio investment, a reversal from an outflow of $1.3 billion in 2014 to a modest inflow of $0.2 billion in 2015.

“Overall, the external position of the Philippines is seen to improve in 2015. This should support the continued strong investor confidence in the economy,” the BSP said. – Rappler.com