CA deficit swells in Q1; BSP sees record $10 B gap
Lawrence Agcaoili (The Philippine Star) - June 15, 2019 - 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) now expects a record current account (CA) deficit of $10.1 billion this year, or 27.8 percent wider than the $7.9 billion shortfall recorded last year, as the gap swelled in the first quarter.

The projected deficit is equivalent to 2.8 percent of gross domestic product this year from 2.1 percent of GDP last year.

The CA 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.

BSP Deputy Governor Diwa Guinigundo said the country is seen booking a wider CA deficit due to higher imports, weak global growth and the trade war between the US and China.

 “We will continue to grow, we will continue to incur CA deficit,” Guinigundo said.

According to Guinigundo, the wider shortfall remains “financeable” amid the strong inflows of foreign direct investments (FDI) as well as foreign portfolio investments or hot money.

Guinigundo added the Philippines has one of the fastest economic growth despite the easing of GDP growth to a four-year low of 5.6 percent in the first quarter from 6.3 percent in the fourth quarter of 2018.

 “As a result of this economic expansion in the Philippines, we have come to that point that savings is not enough to fund the growth,” Guinigundo said.

The country’s CA deficit almost quadrupled to $1.2 billion in the first quarter of the year from $335 million in the same quarter last year, the BSP reported yesterday.

Redentor Paolo Alegre, director of the BSP’s Department of Economic Statistics (DES), said the CA shortfall widened to $1.2 billion or 1.5 percent of GDP in the first quarter of the year from $335 million or 0.4 percent of GDP in the same quarter last year.

 “The CA remained in deficit owing to the trade-in-goods deficit which more than offset the net receipts recorded in trade-in-services, primary and secondary income accounts,” Alegre said.

Data showed the trade-in-goods deficit widened by 17.3 percent to $12.4 billion from January to March this year compared to $10.6 billion in the same period last year.

During the period, import of goods went up by 7.6 percent, while exports of goods declined by 0.8 percent.

On the other hand, Alegre said the net receipts of trade-in-services increased by 11.8 percent to $3.2 billion in the first quarter from $2.8 billion in the same quarter last year due to lower net payments of travel services; personal, cultural and recreational services; and charges for the use of intellectual property.

“This positive development more than compensated for the reversal of the telecommunication services to net payments, along with higher net payments in transport and financial services, and lower net receipts in technical, trade-related, and other business services.

Likewise, he added net receipts in the primary income account jumped 69.3 percent to $1.4 billion from $798 million due to the 31.2 percent decline in payments of investment income, the 11.3 percent upturn in compensation inflows from resident overseas Filipino workers amounting to $2.1 billion, and 40.9 percent jump in interest receipts on reserve assets to $385 million.

On the other hand, secondary income account inched up by 0.9 percent to $6.6 billion from $6.4 billion due to the 2.3 percent rise in net receipts of personal transfers.

Alegre said capital income went up by 6.2 percent to $15 million from $14 million while financial account recorded a net inflow of $ 4.7 billion or more than five times the $816 million inflows.

Foreign direct investments inched up to $1.1 billion from $1 billion, while foreign portfolio investments or hot money registered a net inflow of $1.8 billion or reversing the $1.6 billion outflows.

The other investment account surged 38.5 percent to $1.8 billion from $1.3 billion.

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