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Philippines – DOF: Monitor BOP, interest rates, budget gap as economy recovers
MANILA, Philippines — The Department of Finance (DOF) said three economic indicators – the balance of payments, budget deficit and interest rates – should be monitored in the country’s path toward recovery as quarantine restrictions are starting to ease.
Finance Undersecretary and chief economist Gil Beltran said the government should keep its BOP and fiscal deficit at manageable levels moving forward.
The Bangko Sentral ng Pilipinas (BSP) reported that the BOP reverted to a deficit of $412 million in September, halting a two-month surplus streak due to the payment of foreign debt.
The BOP is the difference between payments into and out of a country during a period. A deficit means that the volume of dollars that flowed outward to cover for the purchase of goods and services outpaced the amount of what came in from exports, remittances from migrant workers, and earnings from business process outsourcing and tourism.
On the other hand, the government sustained a budget deficit of P1.14 trillion in the nine months to September, surging by nearly 30 percent from a year ago’s P879.21 billion. During the period, expenditures jumped 12 percent to P3.38 trillion, while revenues grew five percent to P2.24 trillion.
For 2021, the government expects its fiscal gap to spike to P1.86 trillion or 9.3 percent of gross domestic product (GDP) from P1.37 trillion or 7.6 percent of GDP last year.
Further, Beltran said the BSP should maintain interest rates at levels that can attract investments.
The Monetary Board has kept the benchmark rate at a record low of two percent, with the goal of improving domestic demand and market confidence for the economy’s rebound to take place.
BSP Governor Benjamin Diokno said raising interest rates at this time may hurt the country’s chances at recovering its pandemic losses. In the US, for instance, the Federal Reserve has begun withdrawing its emergency support to the economy by reducing its bond purchases by $15 billion a month.
Beltran also warned against letting up on efforts to pull inflation within the government’s target range of two percent to four percent. Inflation has averaged 4.5 percent as of end-October, even though the latest print slowed to 4.6 percent, from September’s 4.8 percent.
According to the DOF, policymakers should keep an eye out for these economic developments as the government lifts lockdown regulations one after another to unlock commerce and trade.
Metro Manila, for instance, was downgraded to Alert Level 2 until Nov. 21, expanding the operational capacities of indoor and outdoor activities to as much as 70 percent.
Source: https://www.philstar.com/business/2021/11/08/2139665/dof-monitor-bop-interest-rates-budget-gap-economy-recovers