Maintaining good fundamentals will allow the Philippines to recover faster from the impact of the COVID-19 pandemic that triggered a 9.6-percent economic contraction in 2020, the worst since the end of World War 2, the Department of Finance said Wednesday.
The statement was in reaction to recent data showing the current account in the balance of payments reverted from a small surplus of $225 million or 0.3 percent of GDP in the first quarter of 2020 to a slight deficit of $614 million or 0.7 percent of GDP in the first quarter of 2021.
This occurred as imports rose 2.2 percent and exports dropped 0.6 percent year-on-year. This was due to a higher goods trade deficit, slower growth in the services trade surplus, lower primary income balance and a resilient OFW sector.
Despite the current account deficit, the peso remained firm at P48.287/dollar in the first quarter, stronger than the P50.788/dollar average a year ago.
“Maintaining good fundamentals by keeping both the budget deficit and balance-of-payments manageable, keeping interest rates at the level that sustains investments, keeping inflation within the target range and allowing the exchange rate to maintain its competitive level will allow the country to recover promptly as the country unrolls its vaccination program and gradually eases the lockdowns set up to battle the pandemic,” the DOF said.
The Monetary Board of the Bangko Sentral ng Pilipinas, in its latest meeting, kept policy rate at a record low of 2 percent, expecting that inflation rate would remain manageable in the coming months.
Inflation in June slowed down to 4.1 percent after recording 4.5 percent for three consecutive months. This brought the average inflation in the first semester to 4.4 percent, higher than the target range of 2 percent to 4 percent for 2021.
Economic managers said the GDP target range of 6 percent to 7 percent this year remained doable, especially with the rollout of vaccination program to boost business and consumer confidence
The National Economic and Development Authority said GDP could post positive growth in the second quarter after a 4.2-percent decline in the first quarter. The 4.2-percent Q1 contraction was an improvement from the 8.3-percent decline in the fourth quarter of 2020.