Current account deficit balloons in 1st sem

Imports soar, exports decline

The country’s current account deficit ballooned to $3.1 billion in the first half of this year, hitting the estimate for the entire of 2018, from a mere $133-million shortfall as of end-June 2017 as imports of goods soared amid declining exports, the central bank reported.

The Bangko Sentral ng Pilipinas (BSP) in June increased its current account deficit projection to $3.1 billion for the entire 2018, from its previous estimate of $700 million (December 2017). The next revision review is October.

The $3.1-billion current account deficit is equivalent to 1.9 percent of GDP while last year’s $133 million is just 0.1 percent of GDP.

The central bank said this “outcome was due mainly to the widening deficit in the trade-in-goods account and lower net receipts in the primary income account, which more than offset the higher net receipts in the trade-in-services and secondary income accounts.”

For the first six months of the year, the trade-in-goods deficit went up by 27.9 percent to $23.3 billion as imports of goods increased by 10.7 percent while exports of goods declined by 1.6 percent.

Imports of goods amounted to $48.7 billion in the first six months of 2018 from $44 billion in the same period in 2017. The 10.7 percent growth was attributed mainly to higher imports of raw materials and intermediate goods, reflecting the robust expansion in domestic economic activity, said the BSP. In the second quarter, current account shortfall stood at $2.9 billion compared to just $157 million in the same period in 2017. The BSP adjusted its overall external sector projection in June. For this year, they expect balance of payments (BOP) deficit of $1.5 billion which was higher than earlier forecast of $1 billion. The central bank continues to assess that the current dollar stock level remains consistent with the country’s BOP position which was in deficit of $3.71 billion as of end-July. This was more than what was reported same period in 2017 of $1.38 billion.

During Friday’s BOP quarterly briefing, BSP Assistant Governor Francisco G. Dakila Jr. said they will again look at the external account estimates in its scheduled revision meeting in October or November. “It’s better for us to wait for the scheduled revisions of our assessment because then we will have more information (to review and assess),” he said.

The current account is a main component of the BSP. It comes from the inflows of overseas Filipino remittances as well as business process outsourcing and tourism receipts. All these are structural inflows and major sources of foreign exchange for the country.

BSP Department of Economic Statistics head Redentor Paolo M. Alegre Jr. said the current account has the support of structural inflows such as from remittances. “The current account deficit is (still) in line with the government’s projection.”