MANILA – The Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) slashed the 2023 balance of payment (BOP) deficit projection from USD1.6 billion to USD1.2 billion on account of slower global growth outlook.
In a virtual briefing on Friday, BSP Department of Economic Research (DER) Director Sittie Hannisha M. Butocan said the new BOP deficit projection accounts for around 3 percent of gross domestic product (GDP) from the 4 percent of domestic output previously.
“The lower BOP deficit reflects the narrower current account deficit combined with lower financial account inflows on the back of weaker global growth outlook,” she said.
Latest BSP data show that the current account (CA) is now forecast to post a USD15 billion deficit, lower than the previous USD17 billion deficit projection.
The CA components include the imports and exports of goods and services.
Goods exports are now projected to register a slower growth of 1 percent from 3 percent previously, and goods imports are seen to expand by 2 percent from 4 percent.
On the other hand, the services exports projection was kept at 17 percent and the services imports at 11 percent, with the latter due to the robust outlook for the business process outsourcing (BPO) sector, tourism and travel-related receipts, and cash remittances.
Also, the Financial Account is seen to register a USD13.3 billion deficit, lower than the previous USD15 billion deficit projection.
Butocan said the new imports and exports projections are in line with the recently announced forecast of the inter-agency Development Budget Coordination Committee (DBCC), noting that the DBCC figures are based on the recommendations by the BSP.
“However, we also want to emphasize that these figures are forecasts and not targets. The targets that the government has set specifically for exports are embodied in the Philippine Export Development Plan, which was approved or launched yesterday,” she said.
These changes, she explained, were made after noting the “slightly weaker global growth prospects for this year compared to the previous (projection) exercise.”
“While some upside risks have been identified - China’s economic reopening, the unwinding of supply-side disruptions, and decelerating inflation - downside risks continue to dominate the external sector outlook over the medium term,” she said, noting the severe tightening of global financial conditions because of the vulnerability of the financial sector to rising real interest rates.
The BSP official also cited other upside risks to the BOP and these include the “sharper-than-expected contractionary effects of the synchronous central bank rate hikes amid high debt levels and stickier inflation, which, she said “may promote continued monetary tightening in some jurisdictions.”
“And while we expect some positive outcomes from China’s economic reopening, it may not be as strong as expected,” she said.
On the local front, she said risks on the growth outlook include the elevated but decelerating inflation rate, waning pent-up demand due to rising interest rates, and the tighter fiscal space. (PNA)
