BSP lowers 2016 BOP surplus projection


Q1 current account surplus narrows to $477M from year-earlier $2.2B

The central bank revised downward its balance of payments (BOP) projection for 2016 to reflect recent and prospective economic developments—both domestic and global—that could have a bearing on the outlook for the country’s external payments position, following the release of Q1 data that showed a lower current account surplus than a year earlier.

“The overall BOP surplus in 2016 is expected to taper to $2 billion from $2.2 billion in the December 2015 projections exercise,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo announced in a press briefing on Friday.

The BSP’s revised forecast is lower than 2015’s full-year BOP surplus of $2.6 billion.
Guinigundo said the BOP assessment incorporates the latest available data, such as the four-month cash remittances inflows which grew 3.1 percent to $8.67 billion; the net foreign direct investments which rose more than 52 percent to $1.293 billion in the first quarter; and the foreign portfolio investments net inflow of $129 million for the first five months of 2016.

As for the global developments, he said the BSP included in the assessment the expected two tightening moves of the US Fed this year; new uncertainty coming from the possible exit of the Great Britain from the eurozone; other developments in the European economy; and signs of some economic stabilization in China.

“In terms of the domestic economy, we expect the macroeconomic fundamentals to continue drawing interest to the equities market, government securities, and bank deposits,” he added.

While the projected surplus in the current account balance has been revised upward, the financial account is expected to reverse to an outflow from an initially projected slight inflow in 2016, according to the BSP official.

Guinigundo said the forecast for 2016 current account surplus was revised upward to $5.8 billion, equivalent to 1.9 percent of gross domestic product (GDP), compared to $5.7 billion in the December 2015 projection exercise “due to the expected higher receipts from the services and primary income accounts.”

However, it was lower when compared to the $8.4 billion surplus in 2015 because of the expected widening of the trade deficit with the larger downward payments of services and income revision in the level of exports than that of imports.

The full year growth for goods exports in 2016 is seen to moderate to 3 percent from an expected growth rate of 5 percent in the December 2015 projection exercise.

“This considers the subdued outlook for the global economy and further decline in commodity prices,” the BSP deputy governor said.

Meanwhile, goods imports for 2016 are expected to grow by 7 percent, lower than the earlier projection of 10 percent in December 2015, on account of the decline in energy and metal prices.

“We expect the current account will continue to be challenged by the difficult trade-in-goods account . . . means that exports will continue to be soft…,” Guinigundo added.

Meanwhile, the sustained surplus in the current account is expected to be supported by overseas Filipino remittances and robust receipts from business process outsourcing (BPO) and tourism.

On the other hand, the initially projected small net inflow in the financial account in 2016 has been revised to a slight net outflow amounting to $500 million.

“This is to reflect the anticipated higher residents’ acquisition of financial assets abroad as the US Federal Reserve hiked its policy rate in end-2015 and is expected to do so in the second semester of 2016,” Guinigundo said.

While the global financial environment is expected to remain volatile, the bullish business confidence is expected to support continued entry of foreign direct investments (FDI) in the country, he added.

As a result, year-end gross international reserves (GIR) are still anticipated to be about $82.7 billion, an improvement from the actual $80.7 billion posted in 2015.

At this level, the GIR remain ample, covering about nine months’ worth of imports of goods and payments of services and income.

Q1 current account

The BSP on Friday also announced that the country’s current account for the first quarter of 2016 remained in surplus at $477 million, or 0.6 percent of the country’s gross domestic product, but was lower than the surplus in 2015.

The BSP said the country’s current account in the first three months of the year declined from the $2.2 billion surplus recorded during the same period in 2015 due “to the significant widening of the trade-in-goods deficit as merchandise exports fell while merchandise imports increased.”

Current accounts consist of transactions in goods, services, primary income and secondary income, and measure the net transfer of real resources between the domestic economy and the rest of the world.

The BSP data showed that the trade in goods account, which is composed of exports and imports of goods, posted a wider deficit of $8 billion compared with the $4.8-billion deficit seen a year earlier.

The primary income account, which shows flows for the use of labor and financial resources between resident and nonresident institutional units, recorded net receipts of $579 billion at end-March “amid lower residents’ payment of dividends to non-resident investors.”

The net receipts of secondary income account, or current transfers between residents and nonresidents, increased by 11.1 percent to $6.4 billion.


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