ANZ Research sees smaller PHL trade deficit next year

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THE PHILIPPINES will likely see a narrower external trade gap in 2019, a global bank said, citing help from falling oil prices in the world market.

Analysts at ANZ Research said the country’s current account deficit could see a slight narrowing next year, coming from a wide gap posted in 2018.

“We also forecast an improvement in the current account positions in India, Indonesia and the Philippines in 2019,” ANZ Research said in its Q1 2019 Outlook report.

Every $10 per barrel change in world crude prices will adjust the current account by an equivalent of 0.50% of gross domestic product (GDP), given that the Philippines is a net oil importer.

The impact is smaller for India and Indonesia at 0.25% and 0.11% of GDP, respectively.

“Thus, the recent fall in crude oil prices has been unambiguously positive for all three economies,” the bank economists said.

However, aggressive Philippine government spending may partly offset the impact of lower crude costs.

“The correction in the Philippines should be more moderate, hampered by a persistent expansionary fiscal policy,” ANZ Research said.

The current account, which measures fund flows from goods and services trading, posted a $6.47-billion deficit in the nine months to September. The Bangko Sentral ng Pilipinas (BSP) expects this level to hold till yearend at $6.4 billion, equivalent to 1.9% of GDP, amid a steady rise of the import bill.

Contrary to ANZ Research expectations, the central bank projects the trade gap to bloat to an $8.4-billion deficit next year — equivalent to 2.3% of GDP which will be the biggest proportion in 17 years — as the country brings in even more raw material and capital goods.

Still, BSP Assistant Governor Francisco G. Dakila, Jr. said that the trade shortfall remains sustainable, with oil price “normalization” helping to temper the increase in import payments.

ANZ Research said the current account gap will sustain the weakness of the peso, which has depreciated versus the dollar for much of 2018. “The Philippine peso will stay under pressure from the deteriorating current account deficit, as the government’s infrastructure building program lifts imports,” the report read.

Philippine GDP growth is expected to decelerate to 6.1% next year from 6.3% this 2018, shy of the government’s 7-8% target.

Meanwhile, inflation is seen returning to the BSP’s target range to average 3.8% in 2019, following a 5.2% estimate this year against an actual 5.2% in the 11 months to November. — Melissa Luz T. Lopez