Sluggish trade prompts surplus

This development was on account of the decline in trade in goods deficit to $15.7 billion from $24.4 billion, which more than offset the lower net receipts recorded in trade in services of $5.2 billion from $5.9 billion

The current account (CA) posted a surplus for the first half following a narrower deficit in trade in goods, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.

“The current account registered a surplus of $4.4 billion in the first six months, a reversal from the $2.6 billion deficit in the same period a year ago,” the BSP said.

“This development was on account of the decline in trade in goods deficit to $15.7 billion from $24.4 billion, which more than offset the lower net receipts recorded in trade in services of $5.2 billion from $5.9 billion,” it added.

Still, the lower primary income and secondary income of $2.1 billion and $12.8 billion versus the previously listed $2.5 billion and $13.3 billion contributed to the CA surplus.

According to the central bank, the narrowing of the trade deficit could be traced to disruptions in the global demand and supply chains as countries imposed restrictions to contain the health crisis.

For the second quarter, CA likewise registered a surplus of $4.4 billion, a reversal from the $931 million deficit in the same quarter year-ago owing to the same factors.

BoP estimate

BSP Deputy Governor Francisco Dakila Jr. said the latest CA number along with other developments will be considered in their current balance of payments (BoP) estimate of $600 million surplus by end-December 2020.

“BoP surplus is good in the sense that it calms down the foreign exchange market in the midst of a very uncertain global environment. But on the other hand, we have to look at what is the source of the surplus,” Dakila explained.

According to him, the significant decline in imports, especially in all categories, will be considered when they revise their BoP outlook.

“We will be looking at the outturn of the BoP for the second quarter and we will be revising our outlook based on this latest information,” he said.

“Given that the situation is highly uncertain, you can expect more frequent updates on the outlook from the BSP,” he added.