Home / Business / Banking & Finance / Philippine’s CA deficit far from being worrisome – BSP exec
A detail of the Bangko Sentral ng Pilipinas building. BSP FACEBOOK PAGE

Philippine’s CA deficit far from being worrisome – BSP exec

Monetary officials maintain that the Philippine Current Account (CA) balance , even at a small deficit, remains in a healthy level.

The Bangko Sentral ng Pilipinas (BSP) has a PHP7 million CA deficit assumption for 2018, which accounts for 0.2 percent of Gross Domestic Product (GDP).

Bangko Sentral ng Pilipinas Monetary Policy Sub-Sector Managing Director Francisco G. Dakila Jr. said the CA deficit assumption for this year took into account the government’s deficit target, which is set at around three percent of GDP.

He explained that the CA balance “mirrors the savings and investments behavior of the economy.”

“Narrowing of the current account balance implies convergence of national savings and total investments,” he said.

Dakila said it is not enough to just look at the CA figure per se, which in 2017 is mostly in deficit and a turn-around from the surpluses in the past several years.

He said a deficit in the country’s CA does not necessarily mean that the domestic economy is overheating.

The country has been registering negative CA figures because of higher importation to address the rising requirements of the expanding economy and as the government invests more in infrastructure.

Dakila said that as the country takes in more investments, it is a plus for the economy and actually what it needs to prevent any overheating.

“If there is no improvement in investment you will not be able to accelerate economic growth,” he said.

The central bank official said the country lags behind its counterparts in the region in terms of investment, particularly on infrastructure, thus, “the need to invest is the reason why the Philippines’ CA is narrowing.”

He, however, clarified that the country’s import cover “is still on the healthy side”, noting that world standard is only three months import cover.

Last January, the country’s gross international reserves (GIR) amounted to USD81.2 billion, which is equivalent to 8.2 months’ worth of imports of goods and payments of services and primary income.

The central bank has an USD80 billion GIR assumption for this year. PNA

Leave a Reply

Your email address will not be published. Required fields are marked *