MANILA – The country’s current account balance is seen posting a wider gap this year as the merchandise trade deficit expands further amid higher imports of goods needed by a growing economy, the Bangko Sentral ng Pilipinas (BSP) said.
Current account measures the balance between inflows and outflows of trade in goods and services as well as remittances and travel receipts.
In a press conference in Manila, BSP Economic Research Director Dennis Lapid said the current account deficit will likely balloon to $10.1 billion this 2019.
In November 2018, the central bank projected the current account deficit this 2019 at $8.4 billion.
The projected current account gap is equivalent to 2.8 percent of the gross domestic product (GDP).
“[This] captures the implications of a growing economy like the Philippines. We have shown in many cases that the Philippine economy is one of the fastest,” BSP Deputy Governor Diwa Guinigundo said.
“This is reflected in the current account. Because of the large merchandise trade deficit based on large imports compared to barely recovering exports, we have seen significant expansion in the merchandise trade deficit notwithstanding the contributions of nearly $30 billion of remittances we get every year, the $22-$23 billion of [business process outsourcing], and nearly $10 billion of tourist receipts.
“We have seen how the current account has expanded in the last three years or so,” Guinigundo said.
As the economy continues to import its requirements to sustain a growing economy, the BSP official said the Philippines will continue to incur a merchandise trade deficit.
“Therefore, the current account will continue to be in shortfall position,” he said.
Despite the growing shortfall in current account, the BSP sees its “financiability” supported by the continued inflows of foreign investment, foreign direct investment, and other kinds of investments, Guinigundo noted.
In the first quarter of 2019, the current account posted a deficit of $1.2 billion compared with a $335- million gap a year earlier.
“The current account remained in deficit owing primarily to the trade-in-goods deficit which more than offset the net receipts recorded in trade-in-services, primary and secondary income accounts,” said BSP Director for Economic Statistics Redentor Paolo Alegre.
The trade-in-goods posted a higher deficit of $12.4 billion from $10.6 billion year-on-year.
“The 17.3 percent widening of the trade-in-goods deficit stemmed from the 7.6 percent increase in imports of goods combined with the 0.8 percent decrease in exports of goods,” Alegre said.
Meanwhile, trade-in-services increased by 11.8 percent to $3.2 billion from $2.8 billion on the back of lower net payments of travel services; personal, cultural and recreational services; and charges for the use of intellectual property.
“This positive development more than compensated for the reversal of the telecommunication services to net payments, along with higher net payments in transport and financial services, and lower net receipts in technical, trade-related, and other business services,” Alegre said. (GMA News)
