Balance of payments deficit seen to narrow this year

THE PHILIPPINES’ balance of payments (BoP) deficit could narrow this year amid slower domestic demand and easing imports growth, ANZ Research said.
ANZ Chief Economist for Southeast Asia and India Sanjay Mathur in an e-mail said that their forecast for the Philippines’ BoP position this year is broadly similar to the projection of the Bangko Sentral ng Pilipinas (BSP).
ANZ Research estimates the Philippines’ BoP position to end the year at a deficit of -1.5% of gross domestic product (GDP). This is slightly higher than the BSP’s projection of $5.4-billion deficit or -1.3% of GDP.
“Overall, there is sufficient momentum in the economy (domestic demand) to ensure that import growth is strong at a time when slowing global growth weighs on exports. Now at some point the BSP’s tightening stance will slow domestic demand and imports but most likely in the latter part of the year,” Mr. Mathur said.
The Monetary Board raised the benchmark interest rate by 50 basis points last week, bringing it to a near 16-year high of 6%. The BSP also signaled further tightening to curb inflation, currently running at 14-year highs.
“So, the improvement in BoP will be more in the second half and I expect that by 2024, the BoP will be more solid,” Mr. Mathur said.
Latest BSP data showed the country’s BoP stood at a record $7.3-billion deficit in 2022, a reversal of the $1.3-billion surplus in 2021. Still, this was better than the $11.2-billion deficit estimated by the central bank.
The BoP gives a glimpse into the country’s transactions with the rest of the world. A deficit means more funds left the country, while a surplus shows that more money came in.
“Basic BoP balances, defined as the sum of current account and foreign direct investments, are projected to turn positive in 2023 with the exceptions of India and the Philippines,” ANZ Research said in a separate note.
The Philippine trade balance in 2022 stood at a record $58.32-billion deficit, higher than the $42.23-billion gap a year earlier, data from the local statistics agency showed. 
Exports rose by 5.6% to $78.84 billion from a year earlier, while imports grew by 17.3% to $137.16 billion. — K.B.Ta-asan