Trade gap to further widen, but BSP sees silver lining

The Philippines continues to spend more dollars on imports than it earns from its exports, further widening a trade gap that puts the spotlight on the country’s weak export industry.

In a press briefing, officials of the Bangko Sentral ng Pilipinas (BSP) said they now expected the current account deficit — the amount by which expenses for imported goods and services exceed export receipts — to hit $10.1 billion by the end of 2019.

Despite this, BSP Deputy Governor Diwa Guinigundo remained optimistic that the account gap was “financeable” saying that imports using up dollars now would translate into higher productivity down the road.

The new forecast was higher than the $8.4 billion current account deficit that the central bank forecast in late 2018 and, if proven accurate, will represent a 28-percent increase over the $7.9-billion in trade related net dollar outflow recorded at the end of 2018.

Although the trade gap was widening, central bank officials said they now expected the Philippines’ balance of payments account — the net total tally of dollar inflow and outflow—to end in a surplus in 2019, reversing last year’s deficit.

The latest BSP forecast showed a balance of payments surplus of $3.7 billion by the end of 2019 compared to a $2.3 billion deficit in 2018.

According to the BSP, this would be possible through a surge in financial account which was expected to end up with a $12.3 billion surplus in 2019, or a 136 percent improvement from 2018’s $5.2 billion.

The financial account surge would ride on the crest of an expected increase in short-term portfolio investments in the Philippine financial market despite a decline in long-term capital inflow.

The expected improvement in the country’s overall balance of payments in 2019 meant the Philippine peso is likely to stay strong against the US dollar which, in turn, will be a boon for importers whose pesos will be worth more in foreign currency.

On Friday (June 14), the BSP said the country’s balance of payments had a surplus of $3.8 billion in the first quarter of 2019 compared to a $1.2 billion deficit in the same period in 2018. Editor: Tony Bergonia)