MARKET expectations that the United States Federal Reserve will hike interest rates only toward the end of 2015 and inflows coming from remittances and the business process outsourcing (BPO) sector will support the Philippine balance of payments (BOP) position this year, ING Bank Manila said in a recent financial markets report.
“The central bank expects about $1 billion in BOP surplus. The likelihood remains high for now, especially with market expectations of a late 2015 Fed rate hike,” Joey Cuyegkeng, senior economist at ING Bank Manila, said in the report.
Cuyegkeng also sees likely increases in structural inflows from overseas Filipino workers remittances and BPO revenues this year.
The country’s external payments position is expected to remain favorable through 2019, he said.
“Structural inflows would keep the payments position strong while keeping foreign exchange reserves at more than adequate levels,” Cuyegkeng said.
Recent data from the Bangko Sentral ng Pilipinas (BSP) showed that cumulative BOP for the first three months of 2015 stood at a surplus of $877 million, reversing a $4.45 billion deficit from a year earlier.
However, the BOP position for the month of March reverted to a deficit of $244 million from the $985 million surplus recorded in February.
The central bank also remains bullish that the country will end 2015 with a BOP surplus given the robust current accounts position and the recovery in the capital and financial accounts.
The BOP summarizes the country’s economic transactions with the rest of the world over a certain period. It consists of the current account, capital account, and the financial account.
Last year, the country posted a BOP deficit of $2.88 billion, reversing the $5.09 billion payments surplus recorded in 2013.