CA deficit to GDP ratio narrows to 0.42% in Q3

MANILA, Philippines — The share of the country’s current account deficit to gross domestic product (GDP) narrowed to 0.42 percent in the first nine months of the year as imports slowed down, while services trade strengthened, the Department of Finance (DOF) said yesterday.

In his latest economic bulletin, Finance Undersecretary and chief economist Gil Beltran said the country incurred a current account deficit of $992 million from January to September, equivalent to 0.42 percent of GDP.

He said this is lower by 83 percent from the $5.84 billion deficit recorded in the same period last year, which translated to 2.46 percent of GDP.

“The current account strengthened with the deficit dropping by 16 percent below the previous level in GDP terms. The current account gained strength even as the country’s economic growth recovered to 6.2 percent in the third quarter,” Beltran said.

The current account is the balance of exports and imports of goods, services and income balances.

A deficit means the Philippines spends more foreign exchange than what comes in as foreign direct investments, foreign portfolio investments, remittances, among others.

According to Beltran, the deficit in the trade in goods during the first three quarters dropped to 13.78 percent of GDP from 15.49 percent in the same period of 2018 as imports slowed down due to lower capital goods purchases.

On the other hand, he said the surplus in the trade in services and income balances rose to 13.4 percent of GDP from 13 percent a year ago.

“Earnings from (business process outsourcing, remittances inflows and earnings from investments abroad by Filipino citizens accounted for these substantial receipts,” the DOF’s chief economist said.  

He said the primary income balance jumped by 52.8 percent to $3.79 billion from $2.48 billion, while secondary income balance likewise grew by 2.7 percent to $20.27 billion from $19.74 billion.

 “Maintaining good fundamentals by keeping both the budget deficit and balance-of-payments manageable, keeping interest rates at the level that sustains the volume of investments and allowing the exchange rate to maintain its competitive level will allow the country to sustain economic growth in the medium-term,” Beltran said.

 Earlier, the Bangko Sentral ng Pilipinas said the country’s current account shortfall is expected to widen to $8.4 billion or 2.1 percent of gross domestic product (GDP) in 2020. 

 This is higher than the projected current account deficit of $5.6 billion or 1.5 percent of GDP for this year.

 The central bank said that the BOP surplus is expected to drop to $3 billion next year from the revised target of $4.8 billion this year.