Current account deficit swells to $3.1 billion in H1

MANILA, Philippines — The country continued to shell out more dollars to finance higher importation in support of the expanding economy, translating to a wider current account (CA) deficit of $3.09 billion or 1.9 percent of gross domestic product (GDP) in the first half, the Bangko Sentral ng Pilipinas reported yesterday.

Based on BSP data, the current account shortfall from January to June already matched the projected $3.1 billion deficit for 2018 and almost 25 times the $133 million deficit equivalent to 0.1 percent of GDP recorded in the same month last year.

The current account position measures the net transfer of real resources between the domestic economy and the rest of the world. It consists of transactions in goods, services as well as primary and secondary income.

Redentor Paolo Alegre, head of the BSP’s Department of Economic Statistics, said the wider current account deficit in the first half was due mainly to the widening deficit in the trade-in-goods account and lower net receipts in the primary income account, which more than offset the higher net receipts in the trade-in-services and secondary income accounts.

He said the trade-in-goods deficit widened by nearly 28 percent to $23.3 billion as imports of goods jumped by 10.7 percent to $48.7 billion while exports of goods slipped by 1.6 percent o $25.3 billion.

He said net receipts in the trade-in-services account surged by 55 percent to $5.9 billion from $3.8 billion due largely to increased net receipts in technical, trade-related and other business services; manufacturing services; and computer services.

Alegre said earnings from BPO services climbed by 6.8 percent to $10.9 billion or a growth of 6.8 percent from the same period.

“These gains, combined with lower net payments for travel, transportation, and financial services more than compensated for the higher net payments in government goods and services, charges for use of intellectual property, and the reversal of the personal, cultural, and recreational services to net payments from net receipts,” he said.

The capital account recorded net payments of $1 million in the first six months, reversing the $24 million net receipts in the same period last year due to lower receipts of other capital transfers to the national government and increased net payments on gross acquisitions of non-produced non-financial assets.

On the other hand, the financial account registered lower net inflows of $252 million, 65.1 percent lower than last year’s $720 million. The direct investment account rose as foreign direct investments jumped by 42.4 percent to $4.1 billion, while net equity capital investments increased by more than seven times to $1.6 billion on account of higher equity capital placements and lower withdrawals.

Net outflows of portfolio investments rose by nearly eight percent to $3.1 billion on account of residents’ higher acquisition of financial assets totaling $2.4 billion.

As a result, the country’s balance of payments position (BOP) yielded a deficit of $3.3 billion in the first half, more than four times higher than the $706 million recorded in the same period last year.

The shortfall in the country’s CA position more than doubled to hit its highest level in 19 years at $2.52 billion last year from $1.2 billion in 2016 primarily due to strong imports to support the growing economy. This was the highest since the CA shortfall amounted to $2.87 billion or 3.5 percent of GDP in 1999.

It peaked at $4.35 billion or 5.1 percent of GDP during the Asian financial crisis in 1997.