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PHL current account gap seen narrowing.

THE country's current account balance is projected to improve in the coming years, but it will still be in deficit up until 2024, according to data from the International Monetary Fund (IMF).

In the IMF's assessment of the world economy as published in the April 2019 World Economic Outlook, the global monetary authority forecast a downtrend in the country's current-account deficit from last year's level.

From a deficit equivalent to 2.6 percent of GDP in 2018, the IMF projected that the country's current account would fall to 2.2 percent of GDP this year.

For next year, the IMF projects the country's current-account deficit to hit 1.8 percent of the country's GDP.

An economy's current account is the largest and most consistent part of its balance of payments (BoP).

The Philippines has incurred a deficit in recent quarters after years of being in the surplus territory due to the rise in its importation bill following the government's drive to ramp up construction and infrastructure in the country.

In its report on the BoP balance, the Bangko Sentral ng Pilipinas (BSP) confirmed that the larger current-account deficit in 2018 developed as the widening deficit in the trade-in-goods account more than offset the higher net receipts posted in the trade-in-services, and primary and secondary income accounts.

The IMF said the current-account deficit as a percentage of the country's GDP is expected to hit 1.4 percent by 2024.

Recent data from the BSP showed a BOP surplus of $3.8 billion in the first three months of the year. The BOP is the summary of the country's dollar transactions with the rest of the world.

The surplus for the first quarter is a significant development from what was seen in 2018, when the Philippine economy profusely bled dollars throughout the entire year.

Comparing its level to the same month in 2018, the $3.8 billion is a turnaround from the $1.2-billion deficit seen in the same period last year.

Security Bank chief economist Robert Dan Roces said, however, that, while surplus reflects the high reserves accumulated by the Central Bank via the capital account, this masks the negative on the current account which measures, among others, imports and exports where the country's imports are high and exports are stagnant.

'Moreover, overseas Filipino workers' remittances-also high for the quarter-are part of the current account which goes to show that the remittances are not enough to cover for the trade gap,' Roces said earlier.

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Publication:Business Mirror (Makati City, Philippines)
Date:Apr 23, 2019
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