The balance of payments (BOP), essentially what is left after the country’s foreign-currency earnings are deducted from its expenses, is projected to remain in surplus of some USD3.5 billion in 2024, according to the Bangko Sentral ng Pilipinas (BSP).
But according to latest BSP modeling, the anticipated excess is seen diminished versus the year ago level of USD3.7 billion, roughly steady as percent of the country’s output expansion, measured as the gross domestic product (GDP) of less than one percent.
“This outcome is largely due to the upward revision in forecasts for portfolio investments and other investments, which compensated for the reduction in the projected FDI level for the year. The higher projected financial account compensated for the widening of the current account deficit during the said year,” the BSP said.
This outlook reflects stable global and domestic growth, easing inflation, and domestic economic support from government efforts, despite ongoing external risks.
Global economic expansion is projected to slow in 2024, with growth primarily driven by advanced economies. Inflation rates are expected to continue their downward trajectory globally, likely prompting central banks to shift toward less restrictive monetary policies. However, significant uncertainties—ranging from geopolitical tensions to climate-related threats—still pose challenges to the global growth forecast.
Also, the economy is expected to meet the lower end of the government’s growth target, bolstered by sustained domestic demand, easing inflation, and lower oil prices. The timely passage of the national budget, coupled with ongoing infrastructure and business environment improvements, is expected to help support domestic growth and external sector performance.
Despite this positive outlook, the risks to the BOP are seen to be tilted to the downside. Moderating global activity, volatile commodity prices, trade tensions, slower-than-expected growth in China, and potential disruptions from AI adoption are identified as key external risks. Moreover, the ongoing threat of weather-related disruptions and new infectious diseases could further undermine the outlook.
For 2024, the BSP forecasts a slightly lower BOP surplus than in 2023, though still better than earlier predictions. This is attributed to an upward revision in portfolio and other investments, which offset a reduction in foreign direct investment (FDI) projections. The financial account is expected to compensate for a widening current account deficit.
The current account, which tracks the country’s trade and income balances, is projected to show a narrower deficit in 2024 compared to the previous year, though it will be wider than the September forecast. This is mainly due to subdued growth in both goods and services exports. Services exports, particularly from business process outsourcing (BPO) and tourism, are expected to decelerate, partly due to AI adoption challenges and slow recovery in Chinese tourist arrivals. Merchandise exports are also likely to underperform, with declines in semiconductor, copper, and banana exports contributing to the weaker outlook.
Looking ahead to 2025, the BSP anticipates the BOP to remain in surplus despite a widening current account deficit. Continued financial account inflows, supported by global trade recovery and moderating inflation, are expected to maintain a positive BOP position. However, uncertainties surrounding US trade, investment, and migration policies—particularly under the incoming Trump administration—remain key risks to the external sector.
Given these projections, the BSP expects foreign exchange inflows to continue supporting the country’s foreign exchange reserves, with further buildup anticipated in the gross international reserves (GIR) through 2024-2025.
