Lower current account deficit; heftier gross international reserves
The Monetary Board approved the revised projections on the balance of payments (BOP) for 2020 at its 11 June 2020 meeting. The revision takes into account new data and recent developments since the projection exercise in November 2019, particularly the impact of the coronavirus (COVID-19) pandemic.
The overall BOP position for 2020 is projected to be a lower surplus of US$0.6 billion (0.2 percent of GDP) from the earlier projected US$2.9‑billion surplus (0.7 percent of GDP) announced in November 2019. This is based on the anticipated lower overall foreign exchange (FX) inflows from both the current and financial accounts.
The current account deficit in 2020 is seen to be lower at US$1.9 billion (-0.5 percent of GDP) from the previous forecast of US$8.4 billion (-2.1 percent of GDP) primarily on account of the projected narrower trade-in-goods deficit given anticipated contractions in both exports (‑4.0 percent) and imports (-5.5 percent) alongside lower expected receipts from trade-in-services. FX inflows from both overseas Filipino (OF) remittances and travel receipts are seen to decline by 5.0 percent and 56.9 percent, respectively, in 2020 amid the economic downturn in OF host countries as well as restrictions on inbound and outbound travel.
Meanwhile, the financial account is expected to post a lower net inflow of US$1.2 billion compared to the previous forecast of US$9.8 billion as both non-resident foreign direct investments (FDIs) and foreign portfolio investments (FPIs) are seen to register modest inflows of US$4.1 billion and US$2.4 billion, respectively.
In line with the expected overall BOP surplus for 2020, the projected GIR level has been revised upward to US$90.0 billion (equivalent to 8.5 months import cover) from an earlier forecast of US$86.0 billion (equivalent to 6.8 months import cover). While the external outlook remains clouded by uncertainty over the full extent of the COVID-19 impact, the BSP expects a gradual rebound in economic activity at home and overseas as public health measures in affected economies and government stimulus programs take effect in many countries. In the case of the Philippines, the economy continues to have adequate external buffers in place even prior to the pandemic outbreak. Authorities also continue to have ample policy space to implement measures to mitigate the effects of disruptions in economic activity.
Moving forward, the BSP reiterates its commitment to its price and financial stability mandates and remains prepared to deploy the full set of its instruments, as necessary, in order to provide policy support to domestic demand amid the global health crisis.