MANILA – The Philippines’ current account (CA) is now projected to likely end 2020 in surplus after posting deficits in recent years, boosted by the lower trade deficit.
As of end-June this year, the country’s current account (CA) is in a surplus amounting to PHP4.4 billion, a turn-around from year-ago’s USD2.5-billion deficit.
It is projected to post a deficit that accounts for about 0.5 percent of gross domestic product (GDP) this year.
Last year, the country’s CA posted a deficit of USD464 million, lower than the USD8.77 billion deficit the previous year because of the lower trade gap and account for 0.1 percent of the country annual output.
In a virtual briefing for the second quarter 2020 balance of payment (BOP) position, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francis Dakila Jr. said an improvement in the country’s imports and exports figures may “translate to a swing in current account deficit to a current account surplus.”
Philippine Statistics Authority (PSA) data show that the trade gap last April posted its highest-so-far this year at 88.2 percent but this has improved to 49.8 percent last July.
Exports last July contracted by 9.6 percent year-on-year while imports posted a higher contraction of 24.4 percent.
Last April, exports posted a negative annual growth of 49.9 percent and imports with a higher level of -65.3 percent.
Based on monetary officials’ assessment earlier this year the exports of goods are projected to contract by 4 percent this 2020 and imports of goods is projected to post a -5.5-percent print.
Dakila said that based on the latest assumption of the inter-agency Development Budget Coordination Committee (DBCC), exports are seen to contract by 16 percent this year and imports by 18 percent.
He said revisions on these two, along with those of the other components of the balance of payment (BOP) position, which refers to its total transactions with the rest of the world, is “imminent”.
The latest BOP assumption of the central bank for this year is a USD6 million surplus, which is equivalent to about 0.2 percent of gross domestic product (GDP).
As of end-June this year, the country’s BOP amounted to USD4.1 billion surplus, lower than the USD4.8 billion surplus the same period last year.
Aside from the improvement in the exports and imports figures, Dakila said the recovery of remittances is also a plus factor.
Cash inflows from Overseas Filipino Workers (OFWs) registered a -4.7 percent annual print last March, -16.2 percent last April, and -19.3 percent last May as more Filipino workers overseas lost their jobs.
However, remittances posted strong growth of 7.7 percent and 7.8 percent last June and July, respectively.
Year-to-date growth of cash remittance inflows, however, stood at -2.4 percent, less than half of the central bank’s 5-percent contraction forecast for 2020 vis-à-vis the impact of the pandemic.
Dakila said remittance growth last June and July “validates our earlier analysis that there is a large altruistic component to overseas Filipino remittance flows where overseas Filipinos tend to remit more to their families for basic sustenance and other immediate needs in times of crisis.”
“It would be good if for the whole year we’re going to see a contraction by less than what we have projected but still there are developments that we have to look at, including large repatriation of workers,” he said.
Citing Department of Foreign Affairs figures, Dakila said about 174,039 OFWs have been repatriated because of the pandemic, and 36 percent of whom are sea-based while the larger number is accounted for by land-based workers.
The Department of Labor and Employment also projects that if the pandemic worsens until the end of the year about 200,000 more OFWs may be repatriated.