Current-account gap shrinks to $1.7B

The Philippine economy experienced less pressure from the outflow of hard currency in the first half of this year, thanks to a lower trade deficit in the April-June period that, in turn, helped the local currency perform better against the dollar, the central bank said.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that the deficit in the first half of 2019 for the current account—which records the country’s total trade in goods and services with the rest of the world—narrowed to $1.7 billion from $3.8 billion in the same period last year.

“This developed as a result of the higher net receipts in the primary income ($2.5 billion from $1.5 billion), trade-in-services ($5.9 billion from $4.9 billion) and secondary income accounts ($13.3 billion from $13.2 billion) and as the deficit in the trade-in-goods account posted a marginal increase ($23.5 billion from $23.3 billion),” the central bank said in a briefing.

As a result, the country’s balance-of-payments (BOP) position—which is the net value of trade and investment flows into and out of the country—for the first half of 2019 recorded a surplus of $4.8 billion, a turnaround from the $3.3-billion deficit posted in the same period last year.

The surplus was a result primarily of the marked increase in net inflows in the financial account combined with the narrowing of the the deficit in the current account.

At this pace—and assuming the trade balance does not widen substantially during the second half—the Philippine economy is poised to undershoot the central bank’s earlier current-account deficit forecast of $10.1 billion by the end of 2019.

It remains to be seen, however, whether the improved trade flows can result in an
improved current-account deficit compared to the $7.9-billion in trade-related net dollar outflows recorded at the end of
last year.

According to the BSP, the current account registered a deficit of $145 million in the second quarter of 2019, a 95.6-percent reduction from the $3.3-billion deficit registered in the same quarter in 2018.

This developed on account mainly of the lower deficit in the trade-in-goods account ($11.3 billion from $12.8 billion).