The Department of Finance (DOF) on Wednesday said the narrower current account deficit, coupled with solid fundamentals, augured well for the country’s growth prospects.
“The current account remains healthy with the current account deficit declining in the first quarter of 2018 compared with last year,” Finance Undersecretary and chief economist Gil S. Beltran said in an economic bulletin.
Beltran noted that in the first quarter, the current account deficit—or when the value of goods and services imported exceeded exports—narrowed to $208 million or 0.27 percent of gross domestic product (GDP) from $860 million or 1.2 percent of GDP a year ago.
“The deficit in the trade in goods balance widened by 7.2 percent to $10.4 billion, from 13.56 percent of GDP to 13.64 percent of GDP as imports rose faster than exports on account of investment goods purchased from abroad to bolster productive capacity. This allowed the economy to grow by 6.8 percent in the first quarter, one of the highest growth rates in Asia,” Beltran said.
He said the deficit was outweighed by the surplus in the trade in services and income balances, which rose by 15.33 percent to $10.18 billion, or 13.36 percent of the GDP. He said earnings from business process outsourcing (BPOs) companies, remittance inflows and investments abroad helped temper the deficit.
“Net exports of services grew by 67.6 percent from $1.77 billion to $2.96 billion. This is accounted for by earnings of BPOs and tourism less imports of services,” according to Beltran.
Also, “primary income which is accounted for by earnings of the country from placements abroad less earnings by other countries from local placements grew by 10.1 percent from $681 million to $750 million,” while “secondary income which is accounted for by remittances accruing to OFWs (overseas Filipino workers) less incomes of expatriates remitted abroad also grew by 1.4 percent from $6.4 billion to $6.5 billion.”
For Beltran, “maintaining good macroeconomic fundamentals by keeping the budget deficit manageable, keeping interest rates at the level that sustains the volume of investments and allowing the exchange rate to maintain its competitive level will enable the country to sustain economic growth in the medium-term.”