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Philippines: Current account surplus to shrink to 0.4% of GDP
The gradual reopening of the Philippine economy in the remaining months of 2020 could narrow the current account surplus, according to Fitch Solutions.
In a report late last week, the macroeconomic research arm of the Fitch Group said its core economic scenario saw the economy gradually reopening through late 2020 and early 2021, allowing domestic activity to pick up.
“As such, the improvement in the current account balance, from an annualized deficit of $0.5 billion in December to a surplus of $1.3 billion in March, is likely to reverse as import demand rises,” it added.
Thus, it sees the country’s current account to post a surplus of 0.4 percent of gross domestic product (GDP) this year.
The latest estimate is narrower than the 2019 current account surplus of $748 million, or 0.7 percent of domestic output. But it is better than the Bangko Sentral ng Pilipinas’ (BSP) projection of a $1.9-billion current account deficit or -0.5 percent of GDP this year.
A major component of the country’s balance of payments, the current account consists of transactions in goods, services, primary income and secondary income. It measures the net transfer of real resources between the domestic economy and the rest of the world.
Latest data shows that the current account recorded a $92-million surplus in the first quarter of 2020, reversing the $1.68-billion deficit in the same period last year.
The central bank mainly credited the surplus “to the narrowing of the trade-in-goods deficit, along with increased net receipts of secondary income.”
This deficit narrowed to $10.2 billion in the first three months from $12.2 billion year-on-year.
The 16.3-percent improvement in this shortfall came as the 10.3-percent decline in imports offset the 4.3-percent dip in exports in the quarter, the BSP said.
The primary income account recorded net receipts of $1.2 billion in January to March, a 6.1-percent decrease from the $1.3-billion net receipts a year earlier.
“This developed due to increased net payments of investment income (15.7 percent), emanating from higher dividends paid to foreign direct investors (44.6 percent), lower interest receipts on intercompany borrowings (22.2 percent) and on reserve assets (12.1 percent) due to falling global interest rates,” the Bangko Sentral explained.
Compensation inflows from resident overseas Filipino workers grew by 1.9 percent to $2.1 billion in the three months ending March.
Source: https://www.manilatimes.net/2020/09/13/business/sunday-business/current-account-surplus-to-shrink-to-0-4-of-gdp/767545/