Current account gap hits $3.1B

The Philippine economy spent substantially more than what it earned through foreign trade in the first half of 2018, with the resulting currency outflows further depressing the value of the peso against the US dollar.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s current account posted a deficit of $3.1 billion in the first six months of the year. This was markedly higher than the $133-million deficit recorded in the same period in 2017.

At this level, the current account—which tallies the country’s trade surplus of gap with the rest of the world—already hit the $3.1-billion full year target of the central bank only halfway into 2018.

“This outcome was due mainly to the widening deficit in the trade-in-goods account and lower net receipts in the primary income account, which more than offset the higher net receipts in the trade-in-services and secondary income accounts,” the BSP said.

The trade deficit for the first half of 2018 rose by 27.9 percent to $23.3 billion as imports of goods expanded by 10.7 percent while exports of goods declined by 1.6 percent.

Exports dropped to $25.3 billion in the first six months of 2018 from $25.7 billion in the same period last year.

Contributing largely to the decrease in exports goods were lower shipments of coconut products (22.9 percent) and fruits and vegetables (16.4 percent). These offset the moderate growth in other commodity groups during the period.

Imports of goods rose to $48.7 billion in the first six months of 2018 from $44 billion in the same period in 2017.

“The 10.7 percent growth was attributed mainly to higher imports of raw materials and intermediate goods, reflecting the robust expansion in domestic economic activity,” the BSP said.

In the second quarter alone, the current account reversed to a deficit of $2.9 billion from a $157 million surplus registered in the same period in 2017.

As such, the country’s balance of payments—the aggregate net value of all transactions for goods and services with the rest of the world, of which the current account is a major part of—had already reached a deficit of $3.26 billion for January to June.

This is 117 percent higher than the $1.5-billion balance of payments deficit the monetary agency is forecasting for the entire year, and 361 percent higher than the $706 million BOP deficit in the same period last year.

The BSP had earlier explained the massive trade gap being incurred by the local economy—where the Philippines has been spending more dollars than it has been earning —was due to the country trying to catch up with its neighbors by importing goods and services to support the Duterte administration’s P9-trillion infrastructure buildup plan.

As a result of the trade and balance of payments gaps, however, the peso has been weakening this year, and aggravating the country’s inflation rate.