THE COUNTRY’S current account deficit more than doubled in 2017 to its widest since 1999, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

The current account deficit stood at $2.5 billion from the $1.2 billion recorded in 2016, breaching the BSP’s $100 million projection for last year.

The latest reading is equivalent to 0.8% of gross domestic product (GDP), versus 2016’s 0.4%.

The wide current account gap has weighed on the peso, Asia’s worst-performing currency that is trading near a 12-year low to the greenback.

Rosabel B. Guerrero, senior director at the BSP’s Department of Economic Statistics, said in a press briefing that this was the largest current account deficit in 18 years.

“The deficit recorded in 1999 was actually higher than the recorded in 2017. In 1999, the deficit was $2.875 billion and that represented 3.5% of GDP,” Ms. Guererro said.

The BSP official said that the latest current account figure “developed on account of the widening trade-in-goods deficit which more than offset the increased net receipts in the trade-in-services, and secondary and primary income accounts during the year.”

Total imports — both goods and services — increased by 14.2% to $89.4 billion from $78.3 billion, while overall exports grew 12.8% last year to $48.2 billion from $42.7 billion in 2016, according to central bank data.

Ms. Guerrero attributed import growth largely to bigger inflows of raw materials and intermediate goods that increased by 16.7% in 2017 year-on-year, as well as mineral fuels and lubricants which surged 32.9%.

Net receipts in the trade-in-services account amounted to $9.5 billion in 2017, 34.8% more than 2016’s $7 billion.

STRONG INVESTMENTS
Francisco G. Dakila, Jr., BSP’s Monetary Policy Sub-Sector managing director, maintained that the situation should “remain pretty much manageable” and that “it would not blow up”.

“If you look at the reasons behind the narrowing of the current account, it’s really because of strong investment performance,” said Mr. Dakila.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, likewise said that the widening of the current account deficit should not cause concern.

“Anything that would help the economy multiply is definitely good. Trade deficit is not bad necessarily, as long as increasing imports will contribute to expand the economy,” he said in an e-mail.

He said that the widening trade deficit caused by more imports should persist towards the medium term.

“The Philippine economy is thirsty of investments, both public and private. This infrastructure push is unheard of in the history of economic development in the Philippines. It is long overdue,” added Mr. Asuncion.

“However, parallel reforms should also be in the pipeline, like the amendments in foreign investment features of the Constitution to facilitate more FDIs. This will help domestic production easing pressure on the trade deficit eventually,” he said of foreign direct investments.

In the fourth quarter alone, the current account deficit widened almost sixfold to $3.3 billion from $566 million.

The BSP official said that this was likewise due to the widened trade-in-goods deficit.

Imports in 2017’s final quarter surged 20.4% to $24.5 billion from $20.3 billion in 2016’s comparable three months. — Elijah Joseph C. Tubayan with input from Reuters

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