Current account gap narrowed in H1
The narrower current account deficit posted in the first half augured well to economic growth, the Department of Finance said Tuesday, even as imports fell at the start of the year due to government underspending caused by the delay in the approval of the 2019 budget.
In an economic bulletin, Finance Undersecretary and chief economist Gil S. Beltran said the current-account deficit declined to $1.741 billion as of June from $3.756 billion a year ago.
The current account was in a deficit mainly as goods and services imports growth outpaced that of exports.
Beltran nonetheless said the end-June deficit narrowed to 1.03 percent of gross domestic product from 2.36 percent of GDP in the same period last year.
“The deficit in the trade in goods balance also dropped from 14.68 percent of GDP in the first semester of 2018 to 13.91 percent of GDP as imports slowed down due to lower imports of capital goods. Slower capital formation also led to the slowdown in economic growth to 5.5 percent in the first semester of 2019,” Beltran said.
Economic managers had said that the government underspent P1 billion a day on public goods and services—including infrastructure—from January to May due to the late budget approval no thanks to earlier squabbles among legislators over alleged “pork” funds.
“The current account strengthened with the deficit dropping almost five times below its level in GDP terms. The current account level will normalize as the country’s economic growth recovers and the growth of imports of capital goods resumes,” Beltran said.
“Maintaining good fundamentals by keeping both the budget deficit and current account manageable, keeping interest rates at the level that sustains the volume of investments and allowing the exchange rate to maintain its competitive level will allow the country to sustain economic growth in the medium term,” he added.
The Bangko Sentral ng Pilipinas had projected a current-account deficit of $10.1 billion by the end of 2019, bigger than end-2018’s $7.9 billion.
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