The surplus state of the country’s current account, a key component of the balance of payments (BOP), could prove unbroken yet again this year and totaling as much as $9 billion, according to the Manila unit of the Dutch financial services giant ING Group.
The projected current-account surplus, indicative of an economy that has become a net lender to the rest of the world, was based on anticipated lower oil-imports bill aggregating $13 billion last year alone.
The price of Dubai crude, representing Asia’s oil-import benchmark, has fallen significantly lower thus far this year.
As a result, the current-account surplus this year was likely to exceed the year-ago level by $1 billion to $2 billion, Joey Cuyegkeng, ING Bank economist in Manila, said. The Philippines posted a current account surplus totaling $1.28 billion in the first nine months last year, based on latest numbers.
Cuyegkeng said the likelihood of a modest growth in imports this year was “high at best,” as imports decline in value, following the steep slump of oil prices in the international market.
“This year’s oil-import bill could be 30 percent lower than last year’s $13 billion—which would mean a narrower trade deficit at worst, or a $2-billion surplus this year. This assumes a $60 per barrel of Dubai oil and a 6-percent increase in oil demand,” Cuyegkeng explained.
“Such a development could bring the current account back up to around $8 billion to $9 billion this year,” he quickly added.
Based on recent government forecasts, the current account could end the year in surplus totaling $6.8 billion, or equal to 2 percent of the country’s local output measured as the gross domestic product.
An earlier forecast projected the current account excess up to only $6.6 billion.
The country’s current account is a component of the Philippines’s balance of payments (BOP) and had been in a state of excess since 2005. The current account is the most stable and largest surplus-yielding component of the BOP.
According to BSP data, the current account surplus was widest at $1.73 billion in October 2013, but stood as a deficit totaling $1.18 billion in July 2008.