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BoP 2021 estimate raised on better economic landscape

The Philippine central bank raised its balance of payment (BoP) projection for this year on expectations of an improved economic landscape here and overseas.

It now expects the payment position to post a $7.1 billion surplus by year-end, which is lower than the $16-billion surplus last year but higher than the $6.2-billion surplus projection made in March.

“The better-than-expected global economic outlook for the year is driven by upward revisions in the growth prospects of major advanced economies such as the US and Japan, the country’s major trading partners,” the Bangko Sentral ng Pilipinas (BSP) said in a statement on Friday.

On the local front, government efforts to fast-track, the recovery and the faster rollout of coronavirus vaccines are expected to “boost market confidence and encourage further expansion of domestic economic activities.”

The BoP which measures the country’s transactions with the rest of the world. A surplus means more funds entered the economy.

Cash remittances from migrant Filipino workers are expected to grow by 4% this year, unchanged from the previous estimate.

“This is supported by expectations of improved labor mobility following rising vaccination levels in the country and in major destination countries, easing of travel restrictions and reopening of borders to foreign workers,” the BSP said.

It expects the payment position to decline to a $2.7-billion surplus next year, driven mainly by the anticipated narrower current account surplus of $6.7 billion. This is lower than the $3.8-billion surplus estimate given in March.

The outlook depends on the sustained performance of both exports, which should grow by 6% and imports, which should rise by 10%, the central bank said.

Meanwhile, foreign direct investment and hot money inflows are projected to reach $8.5 billion and $7.4 billion, respectively, as the investment climate improves further.

The emerging gross international reserves in 2022 is estimated to reach $117 billion in anticipation of continued foreign currency deposits by the National Government to address the coronavirus pandemic and fast-track its infrastructure program.

The estimates considered potential renewed coronavirus lockdowns, Zeno Ronald R. Abenoja, senior director at the central bank’s Department of Economic Research told an online news briefing.

The country posted a BoP deficit of $2.8 billion in the first quarter, higher than the $68-million deficit a year earlier after an uptick in net outflows in the financial account, coupled with the reversal of the current account from a surplus to a deficit during the period.

The current account posted a $614-million deficit as the merchandise trade gap widened on import growth amid the gradual reopening of the domestic economy, the BSP said. Lower net receipts of primary income also contributed to the deficit.

The country had a $225-million current account surplus a year earlier.

“An expected economic recovery that would lead to a corresponding pickup and rebound in imports plus remittance growth means the current account may not post a substantial surplus,” Robert Dan J. Roces, chief economist Security Bank Corp. said in a Viber message. — BML

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