By Melissa Luz T. Lopez, Senior Reporter
THE central bank expects external trade to balloon to a wider deficit this year and in 2019 as imports are seen to surge faster and as global growth tapers off.
The Bangko Sentral ng Pilipinas (BSP) published their latest balance of payments (BoP) projections on Friday, where they expect a bigger trade gap to persist alongside increased investment inflows.
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 what went in, while a surplus shows that more money entered the Philippines.
The central bank now expects a $5.5-billion BoP deficit this year, more than triple the $1.5-billion forecast given back in May. The BoP tally now stands at a $5.594 billion deficit as of end-October.
This will also surge from a $900-million shortfall posted in 2017, equivalent to 0.3% of gross domestic product.
The BoP deficit will narrow to $3.5 billion in 2019, according to Dennis D. Lapid, director of BSP’s Department of Economic Research.
“One of the key developments that has happened since May is that… we were hearing a lot of trade tensions. Some of those trade tensions have materialized,” Mr. Lapid said during a press briefing.
“We’re also seeing global growth and global trade activity for goods and services, that has had a dampening effect.”
Driving the wider gap in external payments is a growing trade deficit, with the current account expected to expand to a $6.4-billion shortfall in 2018, representing a steadily rising import bill.
The latest forecasts show that imports will grow by another 10% this year from an 18% increase in 2017. In contrast, exports will remain in a slump and pick up by just 1%, following a 21.4% jump posted last year.
These imports reflect additional raw material and capital goods, which are seen to support domestic economic activity.
The trade gap will account for 1.9% of GDP, the widest since 2001.
The current account — which measures fund flows drawn from goods and services trading — will broaden further to an $8.4 billion shortfall next year and will account for 2.3% of GDP, also the biggest share in 17 years.
However, Assistant Governor Francisco G. Dakila, Jr. said that these figures are not directly comparable given the different states of the economy.
“We’re not seeing any widening of the current account to unsustainable levels,” Mr. Dakila said. “Looking forward, we’ve already seen a normalization in prices of oil, so this is going to moderate the imports of mineral fuels.”
The current account is now at a $6.47 billion deficit from January-September.
The Philippines has been seeing current account surpluses until a reversal in 2015, although authorities said this simply reflected increased domestic economic activity given heavy importations for the local infrastructure drive.
By 2019, the central bank sees a better exports picture as growth is seen to pick up by 10%, together with an 11% growth in imports.
The central bank also expects more foreign direct investments (FDI) to enter the Philippines, helping offset softer increases in service inflows.
Cash remittances are expected to grow by 3% this year and in 2019, softer than a 4% increase initially expected.
Travel receipts are seen to grow faster at 13% until next year, up from 10% previously. On the other hand, business process outsourcing revenues will soften to an 8% increase from an earlier 10% estimate.
FDIs are seen to post a banner year at $10.4 billion this year from $10.1 billion in 2017. This will be followed by $10.2 billion in 2019.