The country’s balance of payments position showed a surplus of $568 million in the fourth quarter of 2022, albeit much less than the $2.0 billion surplus seen in the fourth quarter of 2021, the Bangko Sentral ng Pilipinas said on Friday.

“This was primarily caused by the switch from net inflows to net outflows in the other investment account and the fall in net inflows of direct investments,” Monetary Policy subsector officer-in-charge Dennis Lapid explained in a press briefing.

Lapiz added that the BOP surplus decreased due to lower net inflows or net borrowing by residents from other countries, totaling $1.6 billion in the fourth quarter 2022 compared to $5.7 billion in the fourth quarter of 2021.

The current account also changed, from a US$3.7 billion deficit (equal to -3.3 percent of the country’s GDP) in Q4 2021 to a surplus of US$561 million (corresponding to 0.5 percent of the country’s GDP) in Q4 2022.

Reduction in goods trade deficit

“This was primarily caused by a reduction in the goods trade deficit and an increase in net receipts in the accounts for trade in services, primary income, and secondary income,” Lapid said.

The BOP position for the entire year in 2022 showed a deficit of US$7.3 billion, a change from the US$1.3 billion surplus in the prior year.

This result was mostly caused by a larger current account deficit of $17.8 billion (equivalent to -4.4 percent of GDP) than the US$5.9 billion deficit (equivalent to -1.5 percent of GDP) recorded in the same period last year, which was in turn the result of a bigger trade in goods deficit.

Larger net inflows

The financial account, meanwhile, reported larger net inflows of $12.6 billion in 2022 compared to $6.4 billion net inflows seen the year before. This was mostly caused by the portfolio investment account switching from net outflows to inflows.

However, the decrease in net inflows of direct and other investments tempered the rise in inflows.

In a separate statement, Bangko Sentral ng Pilipinas said the Monetary Board approved the new set of 2023 and 2024 balance of payments (BOP) projections during its 16 March 2023 meeting.

BOP forecasts

BSP said the emerging BOP forecasts for 2023 and 2024 are underpinned by expectations of subdued global and domestic economic activity this year followed by slightly improved activity by next year.

The Central Bank expects the external sector to register modest improvements for 2023, driven by better than earlier anticipated actual data for key BOP accounts, sustained remittance inflows from overseas Filipinos, the recent reopening of China’s economy, and progress in mobility conditions and easing travel protocols.

“However, there are continued downside risks to external demand conditions, largely stemming from monetary tightening by major central banks in 2022 to ward off inflation, uncertainty in monetary adjustment, and potential ripple effects from banking concerns,” BSP said.

2024 BOP position

BSP also expects the overall 2024 BOP position to remain in deficit territory with a smaller deficit than in the previous forecast, consistent with the normalization of global and domestic economic activity.

According to BSP, the sustained build-up of international reserves is expected to reinforce positive investor sentiment and bring in investment flows, despite the current challenging global environment.

“The BSP will continue to monitor closely emerging external sector developments and risks and how these may impact the BSP’s fulfillment of its price and financial stability objectives,” BSP said.