PHL current account surplus sinks in Q2

The current account (CA) surplus of the country registered a decline in the second quarter of the year on account of increase in trade-in-goods deficit, the Bangko Sentral ng Pilipinas (BSP) reported.

The CA, a component of balance of payments (BOP) position, posted a lower surplus of $65 million from a $3.2-billion surplus a year earlier, according to a data from the BSP.

This contributed 0.1 percent to a gross domestic product lower than the 4.3 percent share recorded last year.

"The substantial widening of the trade-in-goods deficit lowered the CA balance," Rosabel Guerero, BSP director of Economic Statistics, said in a briefing.

External trade deficit, a component of CA, rose to $8.6 billion from $4.2 billion due to a 23.6- percent rise in imports by and a 6.6-percent decline in exports.

"We know the exports are really slow due to what's happening globally...there is sluggish demand from our trading partners - Japan, US, and China," BSP Monetary Policy Sub-Sector Managing Director Francisco Dakila Jr. said during the briefing.

Given the lower surplus in CA, the central bank official said "it does have a downward bias" compared to the full year projection.

BSP's full-year forecast for CA in 2016 is a surplus of $5.8 billion.

"It could be lower than the full year projection but I think what's important if you look at the different components of the current account," Dakila said.

Dakila noted that the increase in other components of CA such as services and primary income, offset the trade deficit.

The net receipts in trade-in-services stood at $1.7 billion, up 73.6 percent from $964 million.

Meanwhile primary income amounted to $738 million, up 25.8 percent from $587 million.

Despite the continued slump in exports, the BSP official said the country's potential growth remained high due to high domestic demand.

"So in order to be able to produce domestically, we will be needing imports that's actually in line in what we have seen that the main contributor to the developments in the current account is really what's happening to imports. We have had quite strong imports of raw materials and capital goods," he said.

"When you import capital goods that's a signal that you are really confident that you have longer growth potential for the economy," he added.

Dakila noted that the shortfall in the current account is "not really much" because BSP's full-year projection for the BOP is $2 billion. "

We now have about 0.6 billion in the BOP overall, so again to some extent that shortfall has been met by the direct investments, strong inflows in direct investments," he noted.

Asked if the Duterte administration's plan to ramp up infrastructure has been seen in the rise in imports, Dakila said, "That will of course be reflected in capital good imports...actually the capital goods imports have risen by 61 percent."

"It’s safe to say that going forward you can expect that capital goods imports are expected to continue to be strong,” Dakila added. — VVP, GMA News