THE country’s balance of payments (BOP) is seen to significantly improve earlier than expected this year, and remains a key source of resilience and policy flexibility.
This, as local economic managers doubled their projection for the Philippines’s BOP for 2015.
The Bangko Sentral announced on Friday that it expects a $2-billion BOP surplus, a reversal from the $2.9-billion deficit in the actual BOP last year.
The new projection is a significant upward revision from the earlier assumption of $1 billion in surplus for this year.
“This is due primarily to a sustained strong current-account surplus following the downward revision in international oil prices,” the central bank said.
“Overall, the external position of the Philippines is seen to improve in 2015. This should support the continued strong investor confidence in the economy.
Moreover, 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 added.
The BOP is the summary of all transactions of the country with the rest of the world. A surplus means that the Philippines has incurred more foreign-currency earnings during the period as compared to its expenditures.
The government revises the BOP assumptions twice every year.
The expected surge in the country’s BOP accounts for the official assumption of a decade-high current-account surplus for the year.
In particular, the BSP now expects the current-account surplus to hit $14.2 billion, making up 4.4 percent of the country’s gross domestic product. This is also an upward revision from the $6.8-billion current-account surplus as earlier projected.
“The current account is expected to be supported by strong overseas Filipino remittances and robust receipts from business-process outsourcing and tourism. A narrowing merchandise trade deficit is also expected to prop up the current account,” the BSP said.
In terms of trade, exports are seen to rise by 5 percent, from the 4 percent expected earlier. Imports, meanwhile, are seen to grow by 1 percent, lower than the 7 percent expected earlier. This is due to the lower oil prices.
Financial accounts, meanwhile, are also seen to improve and post a lower outflow of $8.4 billion, from the $10.1 billion recorded in 2014.
“While the global financial environment is expected to remain volatile, the continued bullish business confidence is expected to support higher foreign direct investments 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,” the BSP said.
Gross international reserves, meanwhile, are seen to hit around $81.6 billion from the earlier $83-billion assumption. The BSP said that, at this level, it still remains “ample,” covering 10 months’ worth of imports of goods and services.