The country could see more income from its global transactions until next year due to a projected downtrend in inflation and interest rates while trade grows moderately, the Bangko Sentral ng Pilipinas (BSP) said in its balance of payments (BoP) outlook report last Friday.
BSP expects more foreign investments in equities and bonds to flow in for the rest of the year as businesses increase operations due to likely strong consumption of goods and services.
“The higher net inflow in the financial account was due largely to the notable rise in portfolio investments driven, in turn, by stronger global and domestic growth prospects, which will also benefit from the indications of a shift in the monetary policy stance toward easing by the US Federal Reserve,” BSP said.
BoP surplus increased to $88 million as of August from $62 million in July, leading to a cumulative surplus of $1.6 billion surplus in the first eight months of the year, BSP data showed.
Amid higher inflation and interest rates in the second quarter, household consumption grew slower by 4.6 percent compared to 5.5 percent in the same period last year.
Still, prices of goods have remained manageable in the first half of the year as inflation fell to 3.7 percent in June, much lower than the 8.7 percent recorded in January last year.
Meanwhile, unemployment rates improved to 3.1 percent in June from 10.3 percent in 2020 or the pandemic.
Rate cut to drive consumption.
To drive more consumption, BSP eased its policy rate to 6.25 percent last month. BSP Governor Eli Remolona Jr. said he is considering another 25 basis point rate reduction either in October or December.
BSP said remittances from overseas Filipino workers which usually grow over 3 percent in the few months leading to the holidays will also encourage higher consumption.
Sustained government spending on infrastructure at minimum of 5 percent of gross domestic product should also expand the economy, BSP said.