Current account deficit to top BSP target – Fitch
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Mon, 24 Dec 2018 16:20:36 +0000
The Philippines’ current account deficit could exceed the Bangko Sentral ng Pilipinas’ (BSP) target this year, Fitch Ratings said.
“The current account deficit is likely to have widened to around 2 percent of GDP (gross domestic product) in 2018 driven by strong capital goods imports and a sharp slowdown in exports,” the debt watcher said in a recent statement.
Fitch’s current account forecast is higher than the BSP’s revised projection of a $6.4-billion shortfall—equivalent to 1.9 percent of GDP.
The current account — a major component of the balance of payments — consists of transactions in goods, services, primary income and secondary income, and measures the net transfer of real resources between the domestic economy and the rest of the world.
Last year, the Philippines incurred a current account deficit equivalent to 0.8 percent of GDP.
The deficit hit $2.907 billion in the third quarter, a reversal from the $1.1-billion surplus recorded a year earlier. It brought the year-to-date shortfall to $6.471 billion, also a reversal from the $968-million surplus seen in the comparable 2017 period.
For the next two years, Fitch expects the current account deficit to hit -1.9 percent in 2019 and 2020, “reflecting rising capital goods imports under the public investment program.”
The trade deficit widened by 68.5 percent as of end-October to $33.918 billion, from $20.128 billion a year earlier, based on latest available data.
“However, remittances and services exports related to the business process outsourcing (BPO) and tourism sectors are forecast to remain strong and will keep the deficit from widening sharply,” Fitch pointed out.
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