MANILA (Reuters) – The Philippines’ central bank on Friday revised up its current account deficit forecasts for 2022 and 2023, citing intensifying risks to slowing global growth as inflation and interest rates soar.
Bangko Sentral ng Pilipinas (BSP) now expects this year’s current account balance to post a deficit of $20.6 billion, or 5.0% of GDP, compared to its previous forecast of $19.1 billion, or 4.6% of GDP.
For 2023, the deficit is expected to be $20.1 billion, equivalent to 4.5% of GDP. That compares with a previous forecast of $20.5 billion, or 4.4% of GDP.
This year’s balance of payments (BOP) is expected to show a deficit of $8.4 billion, or 2% of GDP, larger than the previous estimate of $6.3 billion, or 1.5% of GDP.
Next year’s balance of payments is expected to post a deficit of $2.5 billion, or 0.6% of GDP, versus previous forecasts of a deficit of $2.6 billion, also equal to 0.6% of GDP.
“These risks of a further downward revision in global growth prospects… are expected to broadly weaken global demand conditions, and thus the country’s external sector,” BSP said in a statement.
BSP lowered its year-end forecast for total international reserves to $99 billion this year, from $105 billion previously, and to $100 billion for 2023 from $106 billion.
However, it said the country’s “strong” macro fundamentals could offset external headwinds, citing strong recovery momentum in the first half driven by the easing of COVID-19 restrictions and the expansion of vaccination coverage.
It added that additional support could be expected from inflows such as remittances from overseas Filipinos and proceeds from business process outsourcing.
BSP expects conversions to grow 4% this year and next.