BOP surplus to fall below $2.3B – BSP

The Bangko Sentral ng Pilipinas (BSP) said the country’s balance of payments (BPO) would fall below the projected $2.3-billion surplus this year.

BSP officials said the BOP would remain at surplus level but they could not say how low it would go with foreign investment expected to drop sharply and exports to weaken further.

BSP Deputy Governor Diwa Guinigundo said, however, that remittances from overseas Filipino workers would continue to drive inflows although possibly not as strong as 2008.

“The original BOP surplus projected for 2009 was $2.3 billion,” Guinigundo said. “But given the worsening scenario, there are reasons to believe that this would moderate to a lower level of a surplus.”

“We’re still doing the 2009 numbers but growth drivers would still be led by remittances which we expect to continue to grow,” Guinigundo added. However he admitted that even remittances would suffer somewhat from the global slowdown.

In 2008, remittances from overseas Filipinos are expected to reach close to $17 billion, growing by about 13 percent compared with 2007 as the country deployed more highly-paid skilled workers abroad.

“There are reasons to expect that remittances would not be as robust or as strong but they would continue to provide some support for current account,” Guinigundo said.

Guinigundo said inflows from business process outsourcing are also expected to be strong in 2009, with some support from foreign direct investments despite the anticipated weakness in portfolio inflows.

“Portfolio investments would be pulled down by continuing risk aversion but perhaps not as bad as this year,” he said.

Central bank officials also said the National Government should consider increasing its foreign borrowing this year to help build up the country’s reserves amid slowing foreign portfolio and export inflows.

Guinigundo said borrowing more from the foreign market is a “good option” since it would secure foreign exchange that the National Government would require for debt servicing.

“It would provide them additional comfort that if and when they need foreign exchange, they would have it,” Guinigundo said. “That is something that the government may wish to consider.”

According to Guinigundo, the BSP had already availed itself of the usual borrowing facilities for reserve management purposes and contingency purposes.

“We want to prepare for any eventuality so we did that in 2008,” Guinigundo said. “It’s important that contingency measures are in place so that if and when situation gets worse, we can handle it. We have to continue to show that we have reserves.”

According to Guinigundo, the BSP was hoping that the outlook would improve for 2009 and foreign portfolio inflows, specifically, would start returning in to the country.–Des Ferriols, Philippine Star