BOP deficit to worsen to $3.1 billion in 2018

 

By Rose de la Cruz

 

The Bangko Sentral ng Pilipinas projected that the balance of payment this year would worsen to $3.1 billion, equivalent to 0.9 percent of gross domestic product due mainly to the projected wider trade deficit as imports would continue to outpace exports.

 

The BSP said the revised BOP projections—from those released in December 2017—incorporates the latest available data and reflect the recent and prospective economic developments, both domestic and global.

 

The current account is seen to post a higher deficit of $3.1 billion, equivalent to 0.9 percent of gross domestic product. This mainly reflects the projected wider trade deficit as growth in goods imports largely outpaces exports growth. Shipments of imported goods are anticipated to gain further traction in 2018 following the momentum seen in the last quarter of 2017. It is expected to grow robustly by 11.0 percent, slightly increased from the December 2017 projection of 10.0 percent. Goods imports are buoyed by the moderate increase in commodity prices, continued growth in imports of raw materials and manufactured goods, capital goods and consumer goods, in line with sustained strong domestic demand. Meanwhile, goods exports are expected to continue their recovery in 2018 with a growth of 10.0 percent, a slight improvement from the 9.0 percent growth assumption released in December 2017. This reflects the firm recovery in both advanced and emerging market economies. The current account will continue to draw support from the steady inflows of overseas Filipino (OF) remittances as well as business process outsourcing (BPO) and tourism receipts.

 

Financial accounts

 

The financial account is 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 vis-a-vis the previous projection.

 

Net inflows of FDI in 2018 are projected to reach $9.2 billion, driven primarily by the sustained positive developments in the domestic economy, expected improvement in global economic conditions relative to 2017 as well as the implementation of public-private partnership projects that were approved/awarded in the previous years, when most projects started. FDI uptick is further seen in 2018 in line with the continued fast tracking and modernization of the country's soft and hard infrastructure, growing interest from nontraditional investment sources, and improved global perception of the Philippines as an

investment destination.

 

The overall BOP position for 2018 is seen to post a higher deficit of $1.5 billion from the earlier projection of $1 billion. This is equivalent to just -0.4 percent of GDP, a very manageable external payments position.

Consistent with the revised BOP projection, the year-end gross international reserve (GIR) position is anticipated to settle at around US$80.0 billion. The GIR level remains ample, covering more than seven (7) months' worth of imports of goods and payments of services and income.

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