The Philippines’ widening current account deficit, the sum of the country’s transactions with the rest of the world in terms of goods and capital, may enjoy a brief respite after crude oil prices fell below $100 per barrel.
ING Bank observed that Brent crude oil, the de facto global benchmark, dropped by more than 7 percent on July 12. The same was observed in the American benchmark, with the West Texas Intermediate (WTI) crude oil.
As of this writing, Brent was pegged at $99.42 per barrel and WTI at $95.77 per barrel.
As for the Asian bellwether, Dubai crude has risen to $104.28 per barrel as of July 11 after sliding down to $98.98 per barrel last July 6.
ING Bank noted that downward pressure on crude oil prices were coming from lingering fears of recession in major economies, made worse by the strength of the US dollar and flare-up in COVID-19 cases in parts of China.
Still, the bank that is based in the Netherlands said the oil market was still tight—an outlook that is set to persist through 2023.
Citing reports from the Austria-based Organization of Petroleum Exporting Countries and the France-based International Energy Agency, ING Bank said oil demand is expected to grow partly due to when China recovers from its lockdowns, while oil producers are expected to struggle in catching up with increased output.
According to the Philippine Statistics Authority (PSA), the country’s deficit in trading goods reached an all-time widest of $5.68 billion in May as imports outran exports amid high oil prices.
Top import
PSA data show that one of the Philippines’ top imports—mineral fuels, which include petroleum—ballooned in terms of value by 129 percent last May.
According to the interagency Development Budget Coordination Committee, the Philippines’ imports of goods is forecast to grow by 8 percent in 2024 to 2028, outpacing the expected 6-percent growth in exports.
At the same time, Dubai crude oil is forecast to be within the range of $70 to $90 per barrel.
As of May, the Bangko Sentral ng Pilipinas (BSP) expects Dubai crude oil to average at above $100 per barrel this year and $89.50 per barrel next year.
Earlier this week, Fitch Solutions said the Philippines’ current account deficit is expected to widen further in the next several quarters as prices of food and energy remain high while the peso weakened.
The research firm said in a commentary they have revised upward their forecast for the Philippines’ current account deficit this year to 4.3 percent of gross domestic product from 2.4 percent as previously forecast.
BSP data show that the current account deficit ballooned to $4.8 billion in the first quarter of 2022 from $32 million in the same period of 2021.