March 21, 2023

BSP forecasts narrower BOP deficit for 2023-2024 due to subdued global economic activity

The Bangko Sentral ng Pilipinas (BSP) has revised its balance of payments (BOP) deficit projections for 2023 and 2024, citing subdued global economic activity that could lead to a narrower trade gap amid persistent external risks.

The BSP now expects a BOP deficit of $1.6 billion for 2022, lower than its previous estimate of $5.4 billion. The updated projection is also lower than the actual BOP deficit as of end-2022, which stood at $7.3 billion.

It further predicts that the country’s BOP shortfall will decline to $500 million in 2024.

The BSP identified the ongoing high inflation, the Ukraine war with Russia, and pandemic-related legacies as key risks to the country’s external sector outlook.

On the domestic front, the BSP highlighted persistent high inflation and easing of pent-up demand as factors that could contribute to muted growth. Despite this, the BSP remains optimistic about the recent reopening of China’s economy, which could yield positive cross-border spillovers and revitalize demand for Philippine export products and services.

The BSP also cautioned that the latest BOP projections “reflect continued downside risks to external demand conditions, largely stemming from monetary tightening by major central banks in 2022 to ward off inflation.”

The uncertainty in monetary adjustment, along with potential ripple effects from banking concerns, could contribute to financial market volatility and dampen external demand, the BSP added.