Current account deficit not detrimental to PH: BSP official

MANILA – The country’s current account (CA) deficit rose to record-high USD7.9 billion in 2018 after imports continue to surpass exports given the strong domestic demand.

Director Redentor Paolo Alegre Jr., of the BangkoSentral ng Pilipinas (BSP) Department of Economic Statistics (BES), pointed out, however, that the deficit in the country’s CA “may not necessarily be detrimental to the country”.

“This (deficit) is because imports growth remains robust while exports of goods is lower-than-projected in 2018 with tepid external demand for Philippines export goods,” he said.

Alegre noted the CA deficit last year accounted for -2.4 percent of gross domestic product (GDP) and was higher than the USD6.4-billion deficit projection for 2018, which accounted for -1.9 percent of domestic output.

“It should be evaluated based on its underlying factors,” he said, citing the trend of an increase in investments than savings.

This “points to high, productive and growing economy”, he added.

BSP data show that trade-in-goods deficit last year increased by 21.9 percent to USD49 billion because of the 9.4-percent rise in imports of goods and the 0.3-percent drop in exports of goods.

Imports of goods went up to USD100.7 billion from year-ago’s USD92 billion, while exports fell to USD51.7 billion from USD51.8 billion in 2017 because of lower exports of coconut and mineral products.

During the same briefing, BSP Deputy Governor DiwaGuinigundo said that before 2018, the highest CA deficit was recorded in 1997 at USD4.4 billion.

He said the CA deficit is not really an issue since what should be considered is whether this can be financed.

Guinigundo said the financial account last year registered USD7.8 billion net inflows, more than twice the USD2.8 billion net inflows in 2017.

Flows from other Investments, specifically loans, helped counter the additional drop in the current account, he said.

The BSP executive also noted that capital outflows were lower.

BSP data show that net outflows of portfolio investments reached USD858 million last year, a decline of 65 percent than year-ago’s USD2.5 billion net outflows.

“Lower fx (foreign exchange) outflows means residents are investing less abroad. It used to be higher outward investment in previous periods,” he added. (PNA)