EXPECTING the global economy to improve and the current account balance to stay in surplus, after contracting by 91.7 percent in 2016, the central bank is reviewing its balance of payments position (BoP) forecast for 2017.
“We will be revising our BoP forecast, maybe before the end of April,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said.
The central bank will take into consideration what the International Monetary Fund will have to say in its World Economic Outlook, which sees the global economy continuing along a path of recovery with growth forecast of 3.4 percent this year and 3.6 percent in 2018, from 3.1 percent in 2016.
“Our old forecast, which we communicated to you, would show an overall position of $1 billion surplus. So, a reversal of the $420 million deficit last year to about a billion dollar surplus . . . But that’s that old forecast,” he said.
Early figures of the various components of the current account have already exceeded the BSP’s 2017 projections, Guinigundo noted.
The current account is a major component of the BoP, and consists of transactions in goods, services, primary income and secondary income. It measures the transfers of real resources between the domestic economy and the rest of the world. The other major component of the BoP is the capital account, which mainly reflects financial transactions
“In the case of the current account we’re expecting about $800 million surplus, with a growth rate of 2 percent for exports and 10 percent for imports. But we need to recast our forecast,” the BSP official noted.
Exports grew by 22.5 percent in January, exceeding the 2 percent growth forecast for the whole of 2017, this year, Guinigundo said.
Another indicator is remittances. Money transfers from overseas Filipinos increased by 8.5 percent in January, compared with the BSP forecast of 4 percent for the entire year.
“I think those are goods sign that the robustness of those two accounts will continue together with good prospects in the global economy,” Guinigundo said.
The current account closed 2016 at of $601 million, shrinking by 91.7 percent from $7.3 billion in 2015. Analysts expect the current account to contract further this year as imports continue to outpace exports as the economy expands and oil is no longer trading at 13 year lows below $27 a barrel as it did early last year.
Guinigundo noted there are those who expect oil prices to stabilize at this point in time.
“If that’s the case, we should also expect steady or stable demand for our overseas Filipino workers, particularly in the Middle East—the oil producing/exporting countries, especially since they like the skills diversification of our overseas workers—and the new markets that have been developed in the last few years,” he said.
Regarding business process outsourcing (BPO), he said the industry is still in an “iffy” situation in the face of policy and regulatory uncertainties under the new US administration when it comes to the BPOs.
“But based on anecdotal evidence, they continue to come. Maybe it’s the expansion that is in question. That’s where the uncertainty is—whether they will expand or not,” Guinigundo noted.
“But I don’t think they will pull out. They will remain. After all, there are very few options or alternatives to the Philippines as a hub for BPOs—call centers, software development, macro operations, etc,” he, added.