Economist bullish on sustained surplus in PH’s current account

MANILA –  Philippines’ current account (CA) surplus is expected to be sustained after about two years in deficit due to lower imports because of the pandemic, as well as the rebound of remittance inflows and exports.

In the first half of 2020, the country registered a USD4.4-billion CA surplus, a turn-around from the USD2.64-billion deficit in the same period last year.

In a study, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort attributed the surplus to a drop in imports and the resulting decline in trade deficit after imports contracted due to the pandemic.

He also cited as a plus factor the recovery of remittance inflows from overseas Filipino workers (OFWs) and the rebound of exports “as economies locally and in many countries worldwide re-opened from lockdowns”.

He said the trade deficit in the second quarter this year alone was narrower at USD3.1 billion against year-ago’s USD10.1 billion.

This improvement also boosted the local currency since lower imports mean lower demand for the US dollar, which is needed to pay for the imports.

Ricafort said that even as quarantine measures have been eased, “the pick up in imports from lockdowns remains relatively slower with monthly import US dollar amounts still the lowest in three years”.

The decline in the international prices of oil also bodes well for the CA because it reduced the country’s oil import bill, he said.

Aside from the CA and the peso, Ricafort said a drop in imports and narrowing of the trade gap countered the 9.8-percent year-on-year decline in remittances in the second quarter, as well as the drop in foreign tourism revenues and any slowdown in revenues of the Philippine offshore gaming operators (POGO).

“Sustained recovery in OFW remittances, exports, as well as in BPO (business process outsourcing) revenues (as more global companies outsource to the Philippines to further save on costs to be able to become more competitive/survive amid adverse business/economic effects of COVID-19) also would help sustain current account surpluses as well as balance of payment (BOP) surpluses in the coming months,” he added.