The Bangko Sentral ng Pilipinas (BSP) forecasts foreign direct investments (FDI) will reach $1.7 billion next year, higher than 2009’s readjusted FDI projection of $1.5 billion.

This was the number presented by BSP to the inter-agency Development Budget Coordinating Committee (DBCC).

The BSP’s original FDI forecast was $700 million but central bank officials changed this last October to $1.5 billion. BSP Governor Amando M. Tetangco Jr. announced revised forecasts after noting the improving economy and the return of funds, which boosted dollar reserves and pumped the balance of payments (BoP) surplus higher.

As of end-August, the BSP reported total registered FDIs of $1.27 billion, 30.5 percent higher compared to the same period last year. For the month of August along, FDIs reached only $36 million compared to July’s $347 million. Year-to-date, FDIs decreased by 62.8 percent.

BSP said FDI level continue to be sustained by equity capital inflows and higher reinvested earnings “despite challenging global economic conditions.”

Tetangco said earlier that inflows from FDIs, foreign portfolio funds and remittances will boost gross international reserves to $40-$42 billion for this year and $47 billion in 2010. The previous projection was $37 billion for 2009.

As for the BoP, the central bank chief forecasts a higher surplus of up to $5 billion this year from an earlier projection of only $700 million. By 2010 the BOP is expected to remain in excess of $3 billion to $4 billion.

“BOP is turning out to be better than originally expected (due) to strong remittances and continued investment flows,” said Tetangco.

As of end-September, BSP reported a BoP surplus of $3.27 billion, pulled higher by the National Government's additional $1 billion deposits from the sale of global bonds. BoP summarizes the country’s economic transactions with the rest of the world.

The BSP reported a small BOP surplus of $89 million last year despite a $1.5 billion deficit in the last quarter of that year.

Earlier this year the BSP had considered taking out several loans to fuel BoP, including additional loans from the Bank for International Settlements and other gold and security-backed short-term loans. They even thought of tapping the International Monetary Fund for liquidity financing.

But with a recovering global economy which translated to flow of funds, BSP did not need to borrow bigger amounts for buffer funding.

In fact in October, the BSP repaid all its short term loans which in March totaled $1.5 billion.