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Philippines was among Southeast Asian central banks that were forced to drawdown reserves in recent months to support their currencies amid broad dollar strength. Image Credit: Shutterstock

The Philippine central bank forecast a wider shortfall in the country’s balance of payments coverage in the current year and the next, reflecting a drop in foreign currency reserves and a larger trade deficit.

Bangko Sentral ng Pilipinas predicts an $11.2 billion deficit in BOP this year from a previously estimated $8.4 billion gap. The nation is expected to end 2022 with $93 billion of foreign exchange reserves, down from $99 billion seen earlier.

In today’s briefing, Dennis Lapid, Officer-In-Charge at the central bank’s Economic Research Department said, “Persistent external risks continue to weigh on the BOP outlook,” including more subdued global growth prospects. Improving consumer sentiment and continued lending activity are among domestic sources of resilience.”

Philippines was among Southeast Asian central banks that were forced to drawdown reserves in recent months to support their currencies amid broad dollar strength. Pressure to do so has eased in recent weeks, with the Federal Reserve expected to be near the end of its monetary tightening cycle and China gradually reopening.

The peso has gained about 6per cent against the dollar this quarter, paring its year-to-date decline to about 8per cent.

Philippines cuts 2023 GDP growth view as global outlook dims

While Philippine economic managers previously tempered economic growth outlook for the the next year, the nation is still expected to post among Asia’s strongest expansions.

“BSP will continue to monitor closely emerging external developments and risks,” said Lapid. The central bank sees the current account, the broadest measure of trade in goods and services, widening as imports growth is seen outpacing exports.

The central bank sees the current account, the broadest measure of trade in goods and services, widening as imports growth is seen outpacing exports.