Current account gap not bad

The Bangko Sentral ng Pilipinas said the current account deficit level is still “very manageable” and will not cause the Philippines in trouble.

“The current account deficit today is much lower than 1 percent of GDP [gross domestic product] and we have no intention to see the current account deficit go higher than 1 percent of GDP,” Bangko Sentral Governor Nestor Espenilla Jr. said. 

Data from the central bank showed the country’s current account posted a deficit of $318 million, an equivalent to 0.4 percent of GDP, in the first quarter of the year, a reversal from the $730-million surplus or 1.1 percent of GDP year-on-year. 

The Bangko Sentral blamed the deficit to the the widening of the trade-in-goods deficit as the growth in imports of goods outpaced that of exports. 

However, higher net receipts in the secondary income, services and primary income accounts helped offset the increase in the trade-in-goods deficit.

Espenilla said cited the expansion of investments in the Philippines as the primary reason for the the current account deficit. 

“These investments, properly executed, should enlarge our productive capacity and our ability to export and produce goods and services. So you have to look at the current account deficit not as a linear progressive widening. but it should correct overtime,” he said. 

“But it’s really the development process. By definition, the developing country is short of savings and needs a lot of investments. And that’s what we are doing now. We’re trying to use the savings of the world to accelerate our investment ambitions. So what’s important is the quality of investments that we are doing,” Espenilla said. 

He said as long as foreign capital were good investments “we shouldn’t be in trouble. And the situation should remain very manageable.” 

The Bangko Sentral said direct investments continued to record net inflows in the first quarter amounting to $1.1 billion from $1 billion last year, while 

portfolio investments posted net outflows of $3.2 billion, more than twice the $1.4-billion net outflows registered last year. 

The country’s gross international reserves stood at $80.9 billion as of end-March, slightly higher than $80.7 billion in December 2016, but lower than $83 billion in March last year. 

At this level, reserves could sufficiently cover 8.6 months’ worth of imports of goods and payments of services and income. They are equivalent to 5.4 times the country’s short-term external debt based on original maturity and four times based on residual maturity.