MANILA -- An economist for ING Bank Manila said the Philippine economy’s continued expansion is not expected to give the country’s current account (CA) deficit leeway and this might even hurt the local currency in the next few years.
In a study, ING Bank Manila senior economist Nicholas Mapa forecasts further widening of the CA deficit given the change in the economy’s import requirements.
“Robust import growth is yet another sign that the Philippines has moved into a new chapter in its growth story, requiring a shift in the country’s import dietary requirement,” he said.
Exports grew by 3.3 percent in the 10th month this year but imports grew more than five-folds at 17 percent.
Trade deficit in turn totaled USD4.21 billion, nearly twice the USD2.59 billion same-month last year.
The economist noted that in the past, a greater portion of the country’s imports are accounted for by fuel and consumer goods.
However, the economic growth in recent years changed this after imports for capital goods and raw materials have increased and diversified on top of the usual demand for raw materials for the country’s electronic exports.
Data from the Philippine Statistics Authority (PSA) released Tuesday showed that last October alone cereals and cereal preparations led the list of top imports of the country with a growth of 52.3 percent and were followed by mineral fuels, lubricants, and related materials; other food and live animals; telecommunication equipment and electrical machinery; miscellaneous manufactured articles; plastics in primary and non-primary form; industrial machinery and equipment; transport equipment; electronic products and iron and steel.
Mapa said that with the change in the country’s external trade picture the CA “will likely remain deep in the red with the PHP (Philippine peso) looking to structural flows such as remittances ahead of the holiday season and the capital and financial account for support.”
“Over the medium-term, protracted current account deficits will likely keep pressure on the PHP in 2019,” he added. (PNA)
