By Melissa Luz T. Lopez
THE BANGKO SENTRAL ng Pilipinas (BSP) expects the country’s external payments position to settle at a wider deficit this year under the pressure of more imports but propped up by service-related inflows and the entry of more foreign capital.
The central bank yesterday published its latest projections for the Philippines’ balance of payments (BoP) position, which “reflects the projected wider trade deficit as growth in goods imports largely outpaces exports growth.”
The BoP measures the country’s transactions with the rest of the world at a given time. A deficit means more funds fled the economy than went in, while a surplus shows that more money entered the Philippines.
The central bank now expects a $1.5-billion BoP deficit this year, wider than the $1-billion gap pencilled in December and from the $863-million actual deficit logged as of end-2017.
Still, the level is deemed “manageable,” equivalent to 0.4% of gross domestic product (GDP).
The country’s BoP position stood at a $1.497-billion deficit as of April as imports continued to offset exports, the central bank has said.
“Shipments of imported goods are anticipated to gain further traction in 2018 following the momentum seen in the last quarter of 2017,” the BSP said in a statement.
The BSP also foresees the current account — which measures fund flows drawn from goods and service trading — to balloon to a $3.1-billion deficit.
This compares to a $700-million shortfall expected back in December.
This will keep total external trade at 0.9% of GDP, with exports seen growing by 10% and imports seen climbing by 11% year-on-year.
The current account settled at $208-million deficit last quarter, smaller than the $860-million gap logged in the same period last year. This came on the back of bigger net receipts from services trade that only partially offset a sustained deficit in goods trading.
“This is to be expected as the Philippine economy continues to grow, and so will demand for goods particularly capital goods,” said Redentor Paolo M. Alegre, Jr., head of BSP Department of Economic Statistics.
Economists and traders have pointed out that the reversal of the country’s current account into deficit has been the main reason for the persistent weakness of the peso, which is currently trading at a fresh 12-year low at P53 per dollar.
Providing a boost to trade flows are business process outsourcing (BPO) sales and a sustained pickup in cash remittances from Filipino workers abroad.
BPO receipts grew by 7.5% year-on-year to $5.5 billion as of end-March, according to BSP data.
Net foreign direct investment inflows, meanwhile, are seen at $9.2 billion, smaller than 2017’s $10 billion.
Gross international reserves will likely slip further to the $80 billion level from 2017’s actual $81.57 billion, but will remain an adequate buffer to external shocks as it can cover seven months’ worth of projected import payments.
Central bank officials have stressed that a modest current account deficit should not be a cause of worry, as it simply reflects increased imports that would eventually be used for infrastructure projects and business expansion plans.