The country’s balance of payments (BOP) position, essentially what is left of the country’s foreign currency earnings after its expenses have been deducted, stood as a surplus of USD1.9 billion in Q4 2023, more than three times the USD568 million surplus recorded in Q4 2022.
According to the Bangko Sentral ng Pilipinas (BSP), the BOP surplus was supported by a significant increase in net inflows in the financial account. The current account, essentially the trade in goods and services, payments made to foreign investors and transfers such as foreign aid, registered a higher deficit in Q4 2023. This means the Philippines imported more foreign services and goods than it exported for the period.
These developments allowed the full year BOP to stand as a surplus of USD3.7 billion, a turnaround from the year ago shortfall amounting to USD7.7 billion.
This also helped boost optimism that the BOP in the first three months this year likely end as a small surplus amounting more or less USD700 million.
“The emerging external outlook for 2024 and 2025 is largely underpinned by expectations of a slight improvement in global economic conditions, particularly for this year; and improvements in domestic demand conditions over the next two years,” the BSP said
The risks to its sanguine outlook are “broadly balanced and less tilted to the downside” in relation to an earlier forecast, the BSP said.
It also said the upside risks to global growth prospects this year come mainly from recent upgrades in the growth forecasts for the United States, China and the ASEAN bloc.
“These upward adjustments are mainly reflective of the stronger than expected growth outcome of these economies in 2023 as well as the role of fiscal policy support in the case of China. Higher GDP output for these economies, which are among the country’s key trading partners, could yield positive spillover effects to the country’s external sector,” it said.
It noted potential supply-side pressures arising from weather and geopolitical shocks coming out that require close monitoring such as the Gaza conflict that if left unresolved “could weigh down on overall business and market sentiment, and dampen external demand anew.”
The BSP said the economy’s post-Covid growth path, aided by government’s new growth strategies and the likelihood of within-target inflation, gives it added confidence of improved consumer and investment demand.
The current account deficit in Q4 2023 reached USD520 million (equivalent to -0.4 percent of the country’s GDP), higher by 942.0 percent than the USD50 million deficit (equivalent to -0.04 percent of the country’s GDP) posted in Q4 2022. This development reflected the widening trade in goods deficit and the contraction of net receipts from trade in services, which outweighed the increase in net receipts in the primary and secondary income accounts.
The trade in goods deficit widened as the value of goods exports declined at a faster rate than that of imports. An estimated 81.4 percent of the drop in the exports value and 64.8 percent of the decrease in the imports value were driven by price changes.
The capital account recorded net receipts of USD21 million in the last quarter of 2023, up by 26.4 percent from the USD16 million net receipts recorded in Q4 2022. This was on account of the net receipts from gross disposal of non-produced non-financial assets (e.g., patents, trademarks, and copyrights) amounting to USD4 million in Q4 2023 from USD1 million net payments from gross acquisitions in Q4 2022.
The financial account recorded net inflows (or net borrowings by residents from the rest of the world) of USD6.4 billion in Q4 2023, higher by 208.5 percent than the USD2.1 billion net inflows in Q4 2022. This was on account of the reversal of the other investment account to net inflows (from net outflows) and higher net inflows in the portfolio investment account.
Meanwhile, the direct investment account registered lower net inflows during the period.
The full-year 2023 BOP position posted a surplus of USD3.7 billion, a turnaround from the USD7.3 billion deficit recorded in 2022. The BOP surplus was driven by the contraction of the current account deficit along with the expansion of the financial account net inflows.
The current account recorded a deficit of USD11.2 billion (equivalent to -2.6 percent of the country’s GDP) in 2023, lower by 38.6 percent than the USD18.3 billion deficit (equivalent to -4.5 percent of the country’s GDP) in 2022.
The lower current account deficit was traced to the narrowing trade in goods deficit alongside the increase in net receipts from the trade in services and secondary income accounts. This was partly mitigated by the lower net receipts in the primary income account.
The trade in goods deficit narrowed as the contraction in the value of goods imports outpaced that of exports. An estimated 91.5 percent of the drop in the imports value and 92.6 percent of the decrease in exports value were due to price changes.
The capital account recorded higher net receipts amounting to USD67 million in 2023 from USD23 million in 2022. This was due mainly to net receipts from gross disposals of non-produced non-financial assets (e.g., patents, trademarks, and copyrights) of USD2 million in 2023 from net payments of gross acquisitions of USD51 million in 2022.
Financial Account. The financial account registered net inflows (or net borrowing by residents from the rest of the world) of US$15.4 billion in 2023, higher by 11.0 percent than the US$13.9 billion in 2022. This was due primarily to the surge in net inflows from the other investment account. This, however, was mitigated by the reversal of the portfolio investment account to net outflows and the decline in net inflows of direct investments.
The country’s gross international reserves (GIR) amounted to USD103.8 billion as of end-December 2023, higher than the USD96.1 billion level registered as of end-December 2022.
The peso averaged P56.06/USD1 in Q4 2023, appreciating by 2.4 percent from P57.39/USD in Q4 2022.
By contrast, the peso depreciated by 0.2 percent from P55.96/USD in Q3 2023. On a full-year basis, the peso depreciated by 2.1 percent to average P55.63/USD in 2023 from P54.48/USD in 2022.
