Larger BOP surplus seen

The Philippines is poised to see a larger dollar surplus this year than previously predicted, as the start of the easing cycle in the United States is expected to induce foreign investment flows into the country and offset any outflows from a bloated import bill.

The Bangko Sentral ng Pilipinas (BSP) now forecasts the country’s balance of payments (BOP) position to register a $2.3-billion surplus in 2024, significantly higher than its previous projection of a $1.6-billion windfall.

If realized, this would translate into gross international reserves (GIR) of $106 billion by the end of the year, up from the old forecast of $104 billion. The GIR serves as the local economy’s defense against external shocks.

The BOP summarizes an economy’s transactions with the rest of the world during a certain period.

A surplus arises when more foreign funds enter the economy against those that left during a period, which may increase the country’s dollar resources that can be used to pay foreign debts and meet import requirements. A deficit means the reverse happened.

Explaining its latest BOP outlook, the BSP said it sees higher net inflow of short-term foreign funds on the back of “stronger global and domestic prospects.”

The country is also poised to corner some of the capital flows to emerging markets and developing economies as a result of the US Federal Reserve’s interest rate cuts.

“These factors should continue to shore up higher levels of both foreign direct investments (FDIs) and foreign portfolio investments (FPIs) for the remainder of the year,” the central bank said.

Optimism

For the entire year, the BSP is expecting net FDI inflows to reach $10 billion, higher than its old projection of $9.5 billion.

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FPIs—also known as “hot money” because of their flighty nature—are forecast to register a net inflow of $4.2 billion, better than the $3.1-billion projection of the central bank before.

The BSP also expects a steady flow of dollars from other traditional sources. Figures showed the projected 2024 growth rates of cash remittances and tourism receipts were unchanged at 4 and 40 percent, respectively.

But the BSP lowered its growth forecast for BPO revenues to 6 percent, from 7 percent previously. The 2024 outlook for merchandise exports sales was likewise trimmed to a 4-percent growth to $57.6 billion, from 5 percent before.

Those inflows, in turn, are expected to cushion the outflows from import payments.