THIS year the country’s current- account surplus is under threat to fall in the deficit territory this week, after years of consistently providing surpluses to support the local currency, economists warned.
In separate reports, economists from HSBC and ING Bank Manila welcomed a plausible scenario of the country’s current account sinking into the deficit territory due to the weak external demand affecting the country’s trade numbers.
The current account has been the biggest and most stable components of the country’s balance of payments (BOP), the summary of the Philippines’s transactions with the rest of the world.
This component is usually buoyed by the strong inflows from overseas Filipino workers’ remittances and the revenues from the business-process out-sourcing (BPO) sector. The export and import numbers of the
country is also part of the country’s current account.
In the first quarter of the year, however, poor trade numbers of the country caused a sharp decline in the country’s current core component of the BoP.
The two powerhouse dollar-generating sectors for the Philippine economy were also not enough to cover the country’s weak trade numbers due to the flat remittances growth during the period.
“With exports falling, imports climbing and the growth of remittances flatlining, the current-account surplus, which has long supported the peso, is beginning to narrow,” HSBC said. “The government’s plan to significantly increase expenditure on infrastructure products should also keep import growth elevated, weighing further on the current-account surplus,” it added.
ING Bank of Manila economist Tim Condon forecasts a $15-billion to $16-billion negative swing in the customs-basis trade deficit this year, based on current trends. “Low single-digit remittances growth and low double-digit growth of business-processing operations inflows would narrow that figure by around $4 billion,” Condon said. “Eleven-billion dollars to $12-billion negative swing in such cold money inflows would swing the current-account surplus, $8.4 billion in 2015, to deficit,” he added.
The current account registered a surplus of $477 million, which is equivalent to 0.6 percent of GDP in the first quarter of 2016.
This is lower than the $2.2-billion surplus—or 3.2 percent of GDP—posted in the first quarter of 2015.