BSP: PH BOP Position Most Likely Deficit at End of 2022

According to the Bangko Sentral ng Pilipinas (BSP), the Philippines’ balance of payments (BOP) position is expected to be at a deficit by the end of the year. This is a result of the increased costs of commodities and disruptions in the global supply chain. 

The BSP released its quarterly report which increases the projected deficit to hit $6.3 billion instead of the bank’s last forecast which was noted at a $4.3 billion deficit. 

The BSP’s prediction for the BOP deficit would be equal to 1.5% of the Philippines’ GDP or gross domestic product. This would mean that more dollars would exit the Philippines compared to dollars that will enter. 

The BSP has said “the emerging BOP outlook for 2022 and 2023 remains quite circumspect in view of the recent buildup in external risks. Of note is the downgraded global growth outlook following the escalation of the Ukraine-Russia conflict and its international ramifications, most notably the increase in food and fuel prices. The anticipated slowdown of China’s economy could also put pressure on trade prospects,” 

If this prediction proves to be accurate, it would mean the $1.3 billion BOP surplus for 2021 would be reversed. The deficit would also spell a weaker currency that may further inflate import costs. For 2022, the BSP’s prediction for imports stands at 18% annual growth, estimated higher than the previous 15% projection. 

For exports, the prediction remained the same at a 7% yearly increase. If this prediction holds, this figure is lower compared to 2021’s 12.4%. Reasons for the weakened demand for Filipino products include higher importation costs and lockdowns in China due to COVID-19.

Source: Philstar