UA&P ECONOMIST ON THE BSP 2015 BOP FORECAST UPWARD REVISION

‘$2B BOP surplus too low’

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The central bank’s new forecast of a $2 billion surplus in the Philippine balance of payments (BOP) for 2015, revised upward from a previous projection of $1 billion, may be too low against the country’s potential to generate substantial BOP inflows every month, an analyst with the University of Asia and the Pacific (UA&P) said.

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“When the BSP [Bangko Sentral ng Pilipinas] says the BOP surplus will be $1 billion to $2 billion, that is too low,” Victor Abola, economist at the University of Asia and the Pacific (UA&P), said.

Abola reiterated that the country can generate a monthly BOP surplus of $700 million given the strong overseas remittances from Filipino workers abroad and growing business process outsourcing (BPO) income.

He noted, however, that the BOP surplus tends to decelerate when the central bank protects the local currency from a stronger US dollar, a practice which may have been a factor in the BSP’s upward revision of the surplus forecast.

“The problem is that it [BSP] sells dollars whenever the exchange rate nears P45 to a dollar,” he added.

Just before the weekend, the BSP raised its projection for this year’s BOP to a surplus of $2 billion from a previous surplus forecast of $1 billion.

The new forecast reflects the BSP’s confidence it could reverse the $2.9 billion deficit the country incurred in full-year 2014.

The current account, which has been in positive territory since 2003 and a major component of the BOP, is projected to post a surplus of $14.2 billion, equivalent to 4.4 percent of gross domestic product (GDP).

The central bank said the curreny account for 2015 will be “supported by strong overseas Filipino remittances, robust receipts from business process outsourcing and tourism, as well a narrowing merchandise trade deficit.”

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