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Philippines: Strong fundamentals to speed up economic recovery
MANILA, Philippines — The government’s strong current account position, together with other sound macroeconomic indicators, may speed up the country’s recovery from the impact of the pandemic, according to the Department of Finance (DOF).
In a report, Finance Undersecretary and chief economist Gil Beltran said the country posted a current account surplus of $92 million in the first quarter, which is equivalent to one percent of gross domestic product (GDP).
This was a reversal of the $1.69 billion deficit recorded in the same period last year, which translated to two percent of GDP.
“The current account reverted to a surplus from a deficit last year as the economy slowed down, bringing down import demand with it,” Beltran said.
“As a result, the peso strengthened from the end-2019 level of 50.8 to $1 to 49.9 to $1 as of end-June 2020,” he said.
The current account is the balance of exports and imports of goods, services and income balances. This account measures the net transfer of real resources between the domestic economy and the rest of the world.
A current account surplus occurs when a country receives more inflows from exports than what it spends on imports.
Beltran said the deficit in the trade in goods balance dropped to $10.25 billion (11.63 percent of GDP) in the first quarter from $12.24 billion last year (14.49 percent of GDP) as imports slowed down.
On the other hand, the surplus in the trade in services and income balances dipped slightly to $10.34 billion (11.74 percent of GDP) from $10.55 billion (12.49 percent of GDP).
Primary income balance, which consists of the country’s earnings from placements abroad, less earnings by other countries from local placements, dropped to $1.25 billion from $1.33 billion, Beltran said.
Secondary income balance, which refers to remittances accruing to overseas Filipino workers, less incomes of expatriates remitted abroad, increased to $6.82 billion in the first quarter from $6.64 billion in the same period last year.
According to Beltran, keeping the country’s balance-of-payments (BOP) manageable, along with other indicators such as budget deficit, inflation and foreign exchange, would help keep the country afloat amid the COVID-19 crisis.
“Maintaining good fundamentals by keeping both the budget deficit and BOP manageable, keeping interest rates at the level that sustains investments, keeping inflation at the lower end of the inflation target and allowing the exchange rate to maintain its competitive level will allow the country to recover promptly,” he said.
Source: https://www.philstar.com/business/2020/08/20/2036484/strong-fundamentals-speed-economic-recovery