THE Bangko Sentral ng Pilipinas (BSP) said the Philippines’ current account deficit has remained manageable as it still accounted for less than 1 percent of the country’s gross domestic product [GDP].
“What we need to take a look at is we are not talking about a blow away current account deficit. The current account deficit today is much lower than one percent of GDP and we have no intention to see it go higher than that,” Central Bank Governor Nestor Espenilla Jr. told reporters over the weekend.
Espenilla said observers have to realize that what was driving the current account deficit was the ramping up of investments in the country.
These investments, Espenilla said, if properly executed, should enlarge the economy’s productive capacity and its ability to export and produce goods and services.
Espenilla said that by definition, a developing country was short of savings and needed a lot of investment, which was where the Philippines was right now.
“That’s what we are doing now. We are trying to use the savings of the world to accelerate our investment ambitions. So what is important is the quality of investments that we are doing.”
“So long as these investments are good investments we should not be in trouble. And the situation should remain very manageable,” he added.
The BSP governor pointed out that observers have to look at the current account deficit not as a linear progressive widening, as it should eventually correct overtime because of the development process in the country.
“For us current account deficit should remain manageable. Actually having a current account deficit at this stage of our economic developments is not bad but it should not be too large.”
“So to us what is a concept of a manageable current account deficit is its should be no more than 1 percent of GDP over the next few years,” he added.
As a major component of the country’s balance of payments, the current account measures the net transfer of real resources between the domestic economy and the rest of the world.
The Philippines’ current account has been consistently posting annual surpluses since 2005, at $1.99 billion that year, to $600 million in 2016.
In the first quarter of 2017, the Philippines’ current account reverted to a deficit of $318 million, equivalent to 0.4 percent of GDP—a turnaround from the $730 million surplus in 2016.
However, for this year, central bank forecasts a $600-million current account deficit for 2017, equivalent to -0.2 percent of GDP, which would reflect for the most part the continuation of a recent trend showing a widening trade deficit.