The Bangko Sentral ng Pilipinas (BSP) announced that they have lowered their projection for the country’s Balance of Payments (BOP) for this year and for 2022, taking into consideration current deficits in the country’s external position as well as recent economic developments in the local and international front.

In a virtual briefing on Friday, the BSP announced that they have cut the 2021 BOP projection from a surplus of $7.1 billion down to $4.1 billion for this year on a “more guarded view” of economic recovery. The 2022 BOP projection has also been lowered from $2.7 billion down to a  $1.7 billion surplus.

“By and large, in this assessment of the BOP outlook, while some upside risks remain, downside risks continue to build up underpinned by the emergence of highly transmissible variants of the Covid-19 virus,” the BSP said.

“The lingering uncertainty continues to cast a shadow on external sector prospects over the near term as the direction and duration of the pandemic remains little known. The BSP continues to emphasize limitations to the projections given the current volatile environment,” it added.

The lower expected surplus reflects the expected lower current account surplus of $3.5 billion from the previous projection of $10 billion amid the expected widening of the trade-in-goods deficit.

This, in turn, results from the projected robust expansion of goods exports by 14 percent, from the previous forecast of 10 percent combined with an even stronger acceleration of goods imports by 20 percent from 12 percent.

Meanwhile, services exports and imports are seen to contract by 2 percent and 4 percent in 2021, respectively, driven by the larger than initially forecasted contraction of travel receipts, despite the steady growth in business-process outsourcing (BPO) revenues.

“The current 2021 BOP assessment takes on a more guarded view of global and domestic economic developments going into the remaining months of the year. While global growth forecasts have been relatively unchanged from earlier estimates, domestic growth prospects have been scaled down, with the 2021 Philippine GDP growth target revised to 4 percent to 5 percent from 6 percent to 7 percent, with risks elevated in both spheres,” the BSP said.

“For 2022, global and domestic economic activities are expected to fare better with recovery more firmly underway on expectations of contained Covid-19 cases as most economies have inoculated a greater share of their population…. The level of optimism continues to be guarded, however, as the recovery in both external and domestic demand remains fragile and depends largely on the reach of mass vaccination and effectiveness of policy support,” the BSP added.

The BOP is usually considered as an important economic indicator in an economy as it shows the level of earnings or expenses of the Philippines with its transactions with the world.

A surplus means that the country had more dollar earnings than its dollar expenditures during the period.

Latest data from the BSP showed that the country posted a BOP surplus of $642 million in July this year. This effectively reduced the cumulative BOP deficit in the first seven months of the year to $1.3 billion from a deficit of $1.94 billion in the first semester of the year.

This also means that the country must incur an average monthly BOP surplus of $1.08 billion from August to December to reach the BSP’s projection.

In contrast, remittances are seen to pick up at a faster pace of 6 percent in 2021 from an earlier projection of 4 percent.

“Lending support to this upward revision are the sustained inflows of OF [overseas Filipinos] remittances of 6.4 percent in the first half of 2021; increased global demand for foreign workers as host economies transition to recovery mode; and enhanced access to digital financial services to facilitate remittance transfers,” the BSP said.

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