There’s no end in sight for the Philippines’ ever-growing trade-related net dollar outflows, with the central bank further widening its full-year forecast for the country’s trade gap due to the economy’s weak export earnings and sustained spending for imports.
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.
This new forecast is higher than the $8.4-billion current-account deficit the central bank forecast in late 2018 and, if it proves accurate, will represent a 28-percent increase over the $7.9-billion in trade-related net dollar outflows recorded at the end of last year.
Despite this, BSP Deputy Governor Diwa Guinigundo reassured the public that the current-account gap remained “finance-able,” explaining that the imports that the Philippine economy was spending for now were expected to translate to higher productive output down the road.
At the same time, however, central bank officials said they now expected the Philippines’ balance-of-payments account—the net total tally of dollar inflows to and outflows from the local economy—to end 2019 in a surplus, reversing last year’s deficit position.
The latest BSP revised forecasts showed a projected BOP surplus of $3.7 billion by the end of this year, marking a sharp reversal from the end-2018 position of a $2.3-billion deficit.
This turnaround will be made possible by a surge in the country’s financial account, which is expected to end the year with a $12.3-billion surplus from only $5.2 billion last year—a 136-percent improvement.
This will be on account of the expected sharp increase in short-term portfolio investments into the Philippines’ financial markets, even as net long-term capital inflows are expected to decline slightly for the rest of the year.