As global threats grow, the Philippines faces larger current account deficits

MANILA: Considering the challenges that the global economy is facing, the Philippine central bank said that it expects the country’s current account deficits to be larger in 2022 and 2023 than they originally had predicted.

The Bangko Sentral ng Pilipinas (BSP) revised its balance of payments (BOP) projections and had estimated a current account deficit of over 19.1 billion dollars in 2022, or a 4.6 percent of the GDP in the same year. 

In March, the government predicted a $16.3 billion deficit for this year, or 3.8 percent of GDP.

The modifications to BOP estimates, according to the BSP, take into account the build-up of external risks, ongoing global monetary policy tightening, and persistent COVID-19 problems.

The BSP cited the lower global economic forecast during the Ukraine-Russia war and its influence on commodity prices, as well as China’s downturn and the impact on capital flows on central bank policy tightening.

The projected BOP deficit for 2023 has been maintained at $2.6 billion (0.6 per cent of GDP).

Money transferred by Filipinos overseas, a critical financial flow supporting the Philippine economy, is predicted to rise 4% this year and 4% in 2023, according to the BSP, citing base effects that are likely to fade and partner economies returning to pre-pandemic levels.

The country’s gross international reserves, on the other hand, are expected to reach $105 billion by the end of 2022 and $106 billion by the end of 2023, down from $108 billion and $109 billion, respectively, in March.