BSP revises BOP, FDI, GIR forecasts for 2021; sets projections for 2022

Just weeks before the year 2021 draws to a close, the Bangko Sentral ng Pilipinas (BSP) on Friday released revised forecasts for the country’s external economic indicators for this year and set new projections for 2022 as it banks on the economy’s recovery from the pandemic-induced recession experienced last year.

In a statement, the central bank said the policy-setting Monetary Board approved a new set of balance of payments (BOP) projections for 2021 and 2022.

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 estimated 2021 BOP forecast is revised to a lower surplus of $1.6 billion equivalent to 0.4% of gross domestic product (GDP) from $4.1 billion or 1.1% of GDP in the September 2021 projection exercise.

The narrower BOP surplus reflects the projected reversal of the current account into a deficit in 2021 of $4.0 billion or -1.0% of GDP from a surplus $3.5 billion or 0.9% of GDP in the previous projection “arising from the foreseen further widening of the trade-in-goods deficit,” according to the central bank.

“This, in turn, results from the projected expansion of goods exports by 16% (from previous forecast of 14%) combined with an even stronger acceleration of goods imports by 30% (from 20%),” it said.

Meanwhile, the 2021 projection for overseas Filipinos' cash remittances is retained at 6%, consistent with the sustained recovery of OF remittances as it grew by 5.6% year-on-year in the first nine months of 2021.

“Lending support to the outlook are expectations of rising demand for foreign workers as the global economy recovers; increasing use of online remittance facilities; and lingering altruistic motives by Filipinos abroad,” the BSP said.

The central bank, likewise, adjusted upward its forecast for foreign direct investments (FDIs) in 2021 to $8 billion after the first nine months FDIs net inflows surpassed its full-year target of $7 billion.

For gross international reserves (GIR), the BSP is expecting it to settle at $111 billion by the end of 2021, lower than its earlier forecast of $114 billion.

“The lower level of actual GIR than earlier anticipated resulted mainly from the use of reserves to pay foreign currency obligations and various expenditures,” the central bank said.

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 a cushion against the devaluation of the local currency.

For 2022, the overall BOP position is projected to remain in surplus but at a more modest level of $700 million (0.2 from the $1.7-billion surplus in the previous forecast.

“The revised forecast is mainly on the back of the projected higher current account deficit of $9.9 billion, driven mainly by the further widening of the trade-in-goods deficit as growth in goods imports (10%) is assumed to continue to outpace exports (6%),” the BSP said.

Overseas Filipinos’ remittances growth in 2022 is expected to stabilize at 4%.

“The projected improvements in global growth prospects and further opening of economies along with the continued mass use of vaccines to prevent the spread of COVID-19 are also expected to continue to lend support to the growth prospects for overseas Filipinos’ remittances,” the BSP said.

FDI is projected to reach $8.5 billion on the back of anticipated improvements in the domestic and global investment climate next year.

“The emerging GIR level in 2022 is estimated to reach $112 billion in anticipation of continued national government foreign currency deposits to address the impact of the pandemic and to fast-track its infrastructure program,” the BSP said.

The central bank said global economic recovery is seen to remain broadly on track, while at the domestic front, there are indications that the spread of the highly transmissible COVID-19 Delta variant has been contained.

“However, growth prospects of some advanced economies were significantly downgraded,” it said.

“Moreover, there were spikes in COVID-19 cases recorded in some Euro areas as well as the recent emergence of the Omicron variant. These warrant continued vigilance of the Philippines’ major trade and investment partners,” it added.

For 2022, the BSP said the continued growth in advanced economies bodes well for Philippine trade and investments.

“This could also lend support to robust BPO revenues and overseas Filipinos’ remittances as businesses are likely to outsource or hire more overseas workers to fill in their manpower needs,” the central bank said.

“The wider global distribution and administration of vaccines coupled with anticipated improvements in immunity and available COVID-19 treatments by next year are also likely to help revitalize international travel and tourism-related services,” it said.

The BSP emphasized the limitations to the forecasts “given the lingering pandemic-induced uncertainties that continue to cast a shadow on external sector prospects over the near term as the COVID-19 pandemic continues with the emergence of new virus variants.”

“Moving forward, the BSP will continue to remain vigilant in monitoring emerging external sector developments and risks and how these may impact the BSP’s fulfillment of its price and financial stability objectives,” it said.—AOL, GMA News