Philippines sees wider 2022, 2023 current account deficits on global risks

THE Philippine central bank on Friday (Sep 16) revised higher its 2022 and 2023 projections for the country’s current account deficits, citing intensifying risks of a global growth slowdown as inflation and interest rates climb.

The Bangko Sentral ng Pilipinas (BSP) now expects the current account balance this year to register a deficit of US$20.6 billion, or 5.0 per cent of gross domestic product (GDP), compared with its previous forecast of US$19.1 billion, or 4.6 per cent of GDP.

For 2023, the deficit is seen at US$20.1 billion, equivalent to 4.5 per cent of GDP. That compares with a previous projection of US$20.5 billion, equivalent to 4.4 per cent of GDP.

This year’s balance of payments (BOP) is forecast to show a deficit of US$8.4 billion, or 2 per cent of GDP, bigger than the previous estimate of US$6.3 billion, or 1.5 per cent of GDP.

Next year’s BOP is expected to register a deficit of US$2.5 billion, or 0.6 per cent of GDP, versus a previous forecast of a US$2.6 billion deficit, also equivalent to 0.6 per cent of GDP.

“These risks of further downward revision in global growth prospects...are expected to broadly weaken global demand conditions, and hence, the country’s external sector,” the BSP said in a statement.

The BSP lowered its year-end forecasts for gross international reserves to US$99 billion this year, from US$105 billion previously, and to US$100 billion for 2023, from US$106 billion.

However, it said the country’s “solid” macroeconomic fundamentals could offset external headwinds, citing strong recovery momentum in the first half driven by the easing of Covid-19 restrictions and expanded vaccination coverage.

Additional support could be expected from inflows such as remittances by Filipinos overseas and business process outsourcing revenues, it said.

The BSP expects remittances to grow 4 per cent this year and next. REUTERS