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The Bangko Sentral ng Pilipinas (BSP) slashed the target ’balance of payments’ (BOP) for both years given the impact of global economic developments despite projection remain in surplus for this year and next year

BSP Department of Economic Research (DER) Managing Director Zeno Ronald R. Abenoja said the BOP projection for this year was cut to USD4.1 billion, which is about 1.1 percent of gross domestic product (GDP), from USD7.1 billion earlier.

The surplus is seen to further moderate to USD1.7 billion next year, which accounts for around 0.4 percent of GDP. This is lower than the earlier projection of USD2.7 billion.

Abenoja attributed the lower BOP surplus outlook to expectations for a lower current account (CA) surplus expectations of USD3.5 billion, down from USD10 billion earlier.

He said the expected widening of trade in goods deficit is also a factor for the revision of the BOP outlook for both years.

He said monetary authorities expect strong growth in goods exports at around 14 percent this year from 10 percent earlier.

Relatively, goods imports are also seen to post faster growth of 20 percent from the 12 percent projection in the second quarter.

“Both of which reflected stronger trade activities in the first half of 2021,” Abenoja said.

However, both the services exports and imports are seen to post contractions this year at -2 percent and -4 percent, respectively.

Projections for services exports were at 6 percent in the second quarter round of the BOP outlook review while it is 7 percent for services imports.

Meanwhile, inflows from Overseas Filipino Workers (OFWs) are seen to post a stronger growth of 6 percent this year from the earlier projection of 4 percent.

This change was primarily boosted by the 6.4 percent growth of remittances in the first half of the year, which was, in turn, traced partly to sustained recovery of inflows from OFWs and the renewed demand for these workers as more countries recover from the pandemic.

“The enhanced access to digital financial services could also facilitate remittances transfers and that could be reflected in our formal BOP numbers,” Abenoja said.

The reduction in the BOP surplus outlook for this year was mirrored by that of the gross international reserves, which is now seen to be around USD114 billion from USD115 billion earlier.

For next year, the GIR projection was also cut to USD115 billion from the earlier forecast of USD117 billion.

CA is seen to post a USD1.4 billion deficit, a reversal from an earlier projection of USD6.7 billion surplus given the brighter prospects for trade.

“Overall, we think that the 2021 BOP assessment takes on a more guarded view of global and domestic economic developments going into the remaining months of the year. While global growth prospects have been relatively been unchanged from earlier estimates we see that domestic growth prospects have been scaled down, with risks elevated in both the global and domestic economic spheres,” Abenoja added.