BSP: Philippines' payments position to swing to deficit in 2022, 2023

Taking into account how the Russia-Ukraine war may affect global recovery, the Bangko Sentral ng Pilipinas (BSP) expects the country's balance of payments (BOP) to shift from a surplus in 2021 to a deficit this year and next.

The BOP consists of Philippine transactions with the rest of the world during a specific period. A surplus means more funds entered the country, while a deficit means more funds left.

The BOP position in 2021 was $1.345 billion in surplus, which was lower than the all-time high of $16.02 billion in 2020.

For 2022, the central bank forecasts a deficit of $4.3 billion or 1.0% of gross domestic product (GDP).

The BSP predicts a $2.6-billion deficit, or 0.6% of GDP, for the following year.

“The current set of BOP projections incorporates latest available data as well as recent emerging developments,” the central bank said.

“The assessment of the BOP outlook for 2022 and 2023 takes on a more guarded view as the ongoing Russia-Ukraine conflict complicates the global and domestic recovery picture, magnifying the disruptions and uncertainties caused by the pandemic,” it said.

The BSP noted that the heightened volatility in both international financial and commodity markets could spill over to the domestic economy of emerging market economies such as the Philippines. 

“Meanwhile, the direct economic linkages of the Philippines with Russia and Ukraine are limited,” it said.

“However, the conflict could negatively impact our major trading partners and present headwinds to the domestic economy,” it added.

Meanwhile, the central bank said remittances and business process outsourcing (BPO) revenues remain vibrant, supported by these sectors’ track record of resilience. 

“The push for the full reopening of the economy this year alongside the continued purposeful rollout of vaccination efforts, which now extends to the younger population, are also expected to boost overall business climate,” the BSP said.

“In addition, the passage and implementation of major structural reforms, particularly the CREATE Law and FIST Act, should help expand opportunities in the external sector. The expected passage of the amendments to the Public Services Act, which will allow greater foreign ownership in telecommunications, airlines and railways, could also herald increased foreign investments and competition in these industries,” it added.

The BSP said it continues to emphasize limitations on the forecasts, particularly given renewed heightened uncertainty at this time.

“The BSP will continue to monitor closely emerging external sector developments and risks and how these may impact the BSP’s fulfillment of its price and financial stability objectives,” it said. — VBL, GMA News