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Finance dep’t downplays record current account gap

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port of manila

THE RECORD current account deficit incurred in 2018 remains “financeable” as the government expects continued investment inflows from abroad, the Department of Finance (DoF) said.

Market watchers should not be too alarmed despite the current account posting an all-time-high $7.9-billion deficit last year, more than three times the $2.2-billion gap in 2017 and shooting past the $6.4-billion projection of the Bangko Sentral ng Pilipinas (BSP).

The current account provides a snapshot of the country’s economic interaction with the rest of the world, covering trade in goods and services; remittances from overseas Filipino workers; profit from Philippine investments abroad; interest payments to foreign creditors; as well as gifts, grants and donations to and from abroad.

A deficit means more funds went out than what came in.

The BSP attributed last year’s record deficit to a surge in imports of raw materials and capital goods, which economic managers attributed to the robust infrastructure pipeline of the Duterte administration.

However, the DoF said inflows from service trade and strong foreign investments should help offset outflows.




“The current account remains financeable even as the deficit rose to 2.4% of GDP (gross domestic product) in 2018. Foreign investors and lenders find the country an attractive investment destination,” the Finance department said in an economic bulletin published yesterday, noting that these will “finance local investment.”

The gap in goods trade ballooned to an equivalent of 18.4% of GDP last year, coming from a milder 12.4% in 2017.

Helping offset these outbound fund flows were inbound payments for business process outsourcing, offshore earnings of Filipino investors and remittances from Filipinos working abroad.

“Maintaining good fundamentals by keeping the twin deficits — budget and current account — manageable thru maintaining interest rates at the level that raises both the volume of savings and investments will enable the country to sustain rapid economic growth in the medium term,” the DoF said.

For 2019, the BSP expects the current account gap to balloon further to an $8.4-billion deficit, equivalent to 2.3% of GDP. — Melissa Luz T. Lopez