Philippine monetary officials cut the Bangko Sentral ng Pilipinas’ (BSP) 2017 balance of payments projections to USD500 million deficit from the earlier forecast of USD1 billion surplus due in part to strong rise of imports.
BSP Deputy Governor Diwa Guinigundo said revision by the International Monetary Fund (IMF) of global growth to 3.4 percent this year, the possible impact of trade policies of US President Donald Trump, and negative forecast for the financial account were among the factors for the downward adjustment of the BOP projection.
Aside from the new BOP forecast, other assumptions that were changed included the current account, which is now at USD0.6 million deficit from USD8 million surplus; the financial account, from USD1.1 billion deficit to USD5 million deficit.
Also, foreign direct investments (FDI) assumption was changed from USD7 billion to USD8 billion inflows; gross international reserves (GIR), from USD84.7 billion to USD80.5 billion; and exports growth from two percent growth to five percent growth.
Forecast for remittances remains at four percent, imports at 10 percent, capital account at USD0.1 billion inflow, and foreign portfolio investment as USD0.9 billion net outflow.
If the projection for the current account materializes, this year will be the second time the country will be posting a deficit after the USD282 million deficit in 2002, Guinigundo said.
The country ended 2016 with a USD0.6 billion surplus in current account while the figure was at USD0.3 billion deficit in the first quarter of 2017.
The trend was attributed to strong rise of imports, which grew 19.2 percent in the first quarter of this year.
Exports growth in the first three months of 2017 registered a lower growth of 14.1 percent.
Guinigundo said the rise of imports was a given because of the rising demand of Philippines’ expanding economy.
Meanwhile, he said IMF’s upward revision on global growth was positive for the Philippines’ export but pointed out that impact on other economies “will not be even” since the country’s trading partners “are barely recovering.”
He said firming up of commodity prices was another plus for Philippine exports.
During the same briefing, BSP Department of Economic Research (DER) Director Zeno Ronald Abenoja said that aside from the possible impact of Trump policies, other factors considered by the central bank’s policy-making Monetary Board (MB) was the slower Chinese economic growth from its 6.7 percent output in 2016.
He said the CA account projection was cut and projected to account for -0.2 percent of gross domestic product (GDP) from two percent 0.2 percent previously, “reflects for the most part the continuation of the recent trend of widening trade deficit.
“This is due to the higher growth in imports, in particular, imports of capital goods and intermediate goods. This is in line with the maintenance of continuance of the strong growth of the Philippine economy,” he added.