Nov BOP in deficit, projections tweaked

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The country’s balance of payments (BOP) posted a deficit of $141 million in November but remained in surplus year to date, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.

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Central bank officials said this was due to debt servicing by the government and also portfolio investment outflows triggered by uncertainty over a US Federal Reserve rate hike.

Several projections for the year were revised to take latest developments into account but the yearend BoP result is still expected to be positive compared to the deficit seen in 2014. A further improvement has been forecast for next year.
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The November shortfall of $141 million was a reversal from October’s $469-million surplus but was still narrower than the $314-million deficit recorded in November last year.

“The BOP yielded a deficit of $141 million on account of continued debt servicing of the national government that was nearly $200 million despite the inflows coming from investment income of the Bangko Sentral,” central bank Deputy Governor Diwa Guinigundo told reporters in a press briefing.

“We should also mention … the cost of the continuing uncertainty … [prior to]the US Fed interest rates liftoff,” Guinigundo said, adding, “we saw the portfolio investments continuing to decline … These are all reflected in the balance of payments.”

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.
On a year-to-date basis, the cumulative 11-month surplus narrowed to $2.136 billion, still above the $2-billion target for this year. It was down from the $2.276 billion recorded in October but was a reversal from the $3.722-billion deficit seen a year earlier.

The central bank said it had revised BOP projections for 2015 to incorporate the latest available data plus recent and prospective economic developments—both domestic and global—that could have a bearing on the outlook for the country’s external payments position.

“Overall, the BSP forecasts the external position of the Philippines improving in 2015 and 2016 from a deficit in 2014,” said Zeno Ronald Abenoja, director of the central bank’s
Department of Economic Research Last year saw the country post a BOP deficit of $2.9 billion.

The outlook for the 2015 BOP was maintained at a $2-billion surplus, Abenoja said, but the current account outlook, while expected to stay positive, is now expected to hit a lower $8.9 billion, or 3 percent of gross domestic product (GDP), from the previous estimate of $14.2 billion.

“The downward revision is due to the expected widening of the trade deficit as exports growth is seen to be slower than previously projected,” he said.

Abenoja said the exports outlook was revised to a 4 percent contraction, from an earlier estimate of 5 percent growth, on account of weaker global growth prospects, the impact of the El Nino weather phenomenon, a decline in metals prices and a less optimistic outlook by industry groups.

Imports growth is expected post zero growth, instead of 1 percent, mainly because of a continued decline in both energy and metal prices as well as weaker prospects for import-intensive exports such as electronics.

For the other BOP components, the central bank retained its 0.1 percent growth forecast for the capital account for this year, while the financial account is expected to post a lower outflow of $3.1 billion from the previous forecast of $8.4 billion.

Going forward, the central bank expects the overall BOP position to improve to a $2.2-billion surplus in 2016, with an anticipated lower current account surplus to be partially offset by a financial account rebound to a small net inflow from a likely net outflow this year.

Abenoja said the 2016 current account would be in surplus at $5.7 billion, lower than the revised $8.9-billion forecast for 2015, due mainly to an expected surge in imports.

The capital account is expected to expand by 0.1 percent, while the financial account could likely reverse to a small net inflow of $400 million in 2016.

As of the third quarter, meanwhile, the central bank reported that the current account surplus was narrower given a trade-in-goods deficit and an easing of the trade-in-services surplus.

The current account posted a surplus of $658 million in July to September, a 77.5-percent decline from the $2.9-billion surplus recorded a year earlier. The central bank said this was equivalent to 1 percent of GDP.

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 net transfer of real resources between the domestic economy and the rest of the world.

The trade in goods account, comprised of exports and imports of goods, posted a wider deficit of $5.8 billion compared with $3.9 billion a year earlier.

The trade in goods account deficit widened by as exports of goods contracted by 20.5 percent, outpacing a similar decline in imports.

“The 20.50-percent decline was in account largely of the contraction in shipments to the country’s major trading partners such as Japan, the US, China, Hong Kong, and Singapore,” the central bank said,

The net services receipts account totaled $540 million, 28.8 percent lower than the $759 million seen a year earlier.

“The decrease stemmed largely from higher net payments recorded in travel and government goods and services combined with lower net receipts form computer services,” the central bank said.

The primary income account recorded net receipts of $194 million in the third quarter, lower compared to $271 million a year earlier.

Net receipts of the secondary income account, or current transfers between residents and nonresidents, slightly dropped to $5.8 billion from a year earlier.

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