BSP hikes BOP, GIR projections for 2021

The Bangko Sentral ng Pilipinas (BSP) has upgraded its projections for the country’s balance of payments (BOP) positions and gross international reserves (GIR) this year as it pinned hopes on the economy’s recovery from the pandemic-induced recession experienced in 2020.

At a virtual press briefing on Friday, BSP Department of Economic Research managing director Zeno Abenoja presented the Monetary Board-approved new sew of BOP projections.

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 latest BSP outlook is an update to the forecast it released in December 2020.

The central bank projects the BOP position to yield a surplus of $6.2 billion in 2021, equivalent to 1.6% of gross domestic product (GDP).

This is an upgrade from its earlier forecast of $3.3 billion BOP surplus in December 2020.

“The latest BOP assessment for 2021 reflects optimism amid expectations of gradual strengthening of the economy anchored mainly on positive developments on the rollout of COVID-19 vaccines, better-than-anticipated global growth momentum and continued strong government support to stimulate recovery,” Abenoja said.

“While the 2021 external account figures are projected to post improvements given brighter prospects globally and domestically, with the latter potentially gaining from expected strong rebound in its major trading partners such as the United States, Japan, and China, the outcomes are expected to remain below pre-COVID levels in nominal terms,” he said.

For GIR, the BSP is expecting foreign currency reserves to grow as much as $114 billion by the end of 2021.

This is an upgrade from its December 2020 forecast of $106 billion for this year.

GIR are foreign assets held by the central bank such as foreign currency-based securities, gold, and foreign currencies. It is used to back a country’s liabilities and serve as cushion against the devaluation of the local currency.

Abenoja, however, said the risk of surging infections amid emergence of new and more transmissible variants of the virus coupled by slow vaccine deployment could cast a shadow on the projected recovery path as these could continue to restrict movement of people, goods and services.

In 2020, the country’s BOP position stood at a surplus of $16.02 billion, an all-time high.

The 2020 BOP performance reflected higher net foreign borrowings by the national government and lower merchandise trade deficit, along with sustained net inflows from personal remittances, foreign direct investments, and trade in services accounted for the favorable performance in 2020.

For this year, though it will remain at a surplus, the BSP expects the BOP position to “moderate,” reflecting the “still volatile environment amid the COVID-19 pandemic.”

For 2022, the overall BOP position is projected to remain in surplus but at a more moderate level of $3.8 billion or 0.9% of GDP, driven by the foreseen sustained widening of the trade-in-goods deficit.

Next year, the GIR level is seen to reach $117 billion in anticipation of continued national government foreign currency deposits to address lingering impacts of the pandemic and fast-track infrastructure-support programs.

“As vaccines are expected to be more widely distributed, the further spread of COVID-19 can be mitigated or at least reduced and thus provide a strong boost for external demand in both goods and services,” Abenoja said.

“It is imperative to remain mindful and vigilant of issues related to the inability of economies to adopt timely and well-executed exit strategies and address the unprecedented rise in both government and corporate debt levels which could weigh down the recovery of external demand,” he added. — RSJ, GMA News