THE COUNTRY’S current account is seen to “normalize” on the back of a recovery in economic growth and higher imports of capital goods, the Department of Finance (DoF) said in an economic bulletin.
The Bangko Sentral ng Pilipinas (BSP) reported on Friday that the country’s current account deficit narrowed 95.6% to $145 million in the second quarter versus the $3.284-billion shortfall logged a year ago.
The central bank said this was on the back of a lower trade deficit of $11.3 billion from $12.8 billion a year ago. Increased net receipts of trade-in-services ($3.3 billion from $2.2 billion), secondary income ($6.7 billion from $6.6 billion) and primary income ($1.2 billion from $712 million) also contributed to the improvement of the current account during the quarter.
For the first half, the current account deficit narrowed to $1.741 billion or 1.03% of gross domestic product (GDP) from the previous year’s $3.756 billion, which was 2.56% of GDP.
“The current account strengthened with the deficit dropping almost five times below its level in GDP terms. The current account level will normalize as the country’s economic growth recovers and the growth of imports of capital goods resumes,” the DoF said in a statement.
The department said to sustain economic growth, the country has to maintain its budget and current account deficit at “manageable” levels, keep the foreign exchange rate competitive, as well as keep interest rates attractive to investors.
“Maintaining good fundamentals by keeping both the budget deficit and current account manageable, keeping interest rates at the level that sustains the volume of investments and allowing the exchange rate to maintain its competitive level will allow the country to sustain economic growth in the medium-term,” it added.
The current account is the balance of exports and imports of goods, services and income balances. This is a component of the country’s balance of payments (BoP) position.
The country’s BoP position reverted to a $991-million surplus in the April-June period, a reversal of the $2-billion deficit booked in the same quarter last year.
For the first semester, the country’s BoP position stood at a surplus of $4.788 billion versus the $3.257-billion deficit booked in the comparable year-ago period.
The economy expanded by 5.5% in the second quarter, its slowest pace in four years. This brought first-semester GDP growth to 5.5%. — BML