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Philippines current account seen to revert to deficit
MANILA, Philippines — Japanese investment bank Nomura expects the current account position of the Philippines to revert to a deficit this year due to higher import demand.
In a report, Nomura economist Euben Paracuelles said the Philippine’s current account balance may return to a deficit of 0.2 percent of gross domestic product this year after posting a surplus of 3.3 percent of GDP last year.
“However, we expect the widening to start more meaningfully in the second quarter on higher import demand from infrastructure implementation later in the year,” Paracuelles said.
While public infrastructure spending remains a priority of the national government, Paracuelles said execution would likely take time, probably in the second half of the year.
In addition, the economist explained capital expenditures disbursements would rise to extraordinarily high levels in the second half due to the scheduled presidential elections in May 2022.
“Before this time, we do not expect the goods trade deficit to remain on a sharp widening path, as the fall in agriculture exports is likely temporary and domestic demand remains subdued due to the local COVID-19 situation, which is preventing a further economic re-opening,” he said.
The current account consists of transactions in goods, services, primary income and secondary income. This account measures the net transfer of real resources between the domestic economy and the rest of the world.
A current account deficit occurs when a country spends more on imports than it receives on exports.
Data from the Philippine Statistics Authority showed the country’s trade deficit narrowed by 46.3 percent to $21.84 billion last year from $40.67 billion in 2019 due to the impact of the pandemic on global trade.
Fewer dollars went out of the country to pay for imports, which declined by 23.3 percent to $85.61 billion from $111.59 billion, while exports booked a double-digit decline of 10.1 percent to $63.77 billion from $70.93 billion.
Economic managers, through the Development Budget Coordination Committee, penned a GDP growth target of 6.5 to 7.5 percent this year and eight to 10 percent next year from a record contraction of 9.5 percent last year.
Based on its forecast last December, the BSP said it is expecting a wider current account surplus of $8.4 billion or 2.3 percent of GDP this year.
The Philippines booked a current account surplus of $8.7 billion from January to September last year, primarily due from the hefty reduction in the trade in goods deficit which more than offset the decline in net receipts of trade in services and primary and secondary income. This reversed the $3 billion deficit recorded in the same period in 2019.
For this year, the BSP sees a current account surplus of $6.1 billion or 1.5 percent of GDP.
Source: https://www.philstar.com/business/2021/02/09/2076248/philippines-current-account-seen-revert-deficit