MANILA – The Philippine government’s infrastructure program is among the factors for the deficit in the country’s current account, but the global market research head for the Association of Southeast Asian Nations (ASEAN) of MUFG Bank does not consider this a negative.
In a briefing Friday, Leong Sook Mei said economists of the Tokyo-headquartered global financial institution forecasts the country’s current account (CA) deficit to be at sub-zero this 2019.
“For next year, it’s probably going to be higher… probably about 2.3 percent of GDP (gross domestic product),” she said. “I don’t think with the Build, Build, Build, program continuing, you’ll gonna see a surplus. It’s not a negative factor but it’s very likely you continue to see a deficit in the current account.”
In an interview, Leong said the Duterte government’s infrastructure program, a priority to help boost domestic growth to around 7 to 8 percent by the end of its term in mid-2022, is resulting in a deficit in the CA because the country imports raw materials for the projects.
She said CA deficit in the first half this year was below 2 percent because of the impact of the delay in the approval of this year’s national budget and the construction ban during the election period, which hindered the implementation of the infrastructure projects.
She, however, said government spending is now going “back on track” thus, the projected rise of the CA until the rest of the year.
“The current account deficit expanding is not really a bad thing. It means that there’s progress on the infrastructure building and all that,” she said.
Leong said “above two percent (CA deficit) is actually the same as what you saw last year.”
“It’s not widening that much, that substantially. It’s just this year it’s going to be much lower,” she added.
CA refers to the balance of trade of an economy and includes net trade in goods and services, net gains on cross-border investments, and net cash transfer over a certain period.
Monetary officials forecast this year’s CA deficit to be about 2.8 percent of GDP, higher than the 2.6 percent of GDP deficit last year.
Leong also traced the CA deficit to expectations for weaker Philippine peso to about 52.5 level against the US dollar next year.
To date, the peso is trading at 50-level against the greenback.
“But the peso depreciation will not be that substantial because the dollar will gonna be weaker next year,” she added.
MUFG also forecasts the country’s GDP to be around 5.8 percent this year, and rise to 5.9 percent next year.
Growth in the third quarter this year quickened to 6.2 percent, an improvement from the 5.6 percent and 5.5 percent in the first two quarters.
Average growth to date stood at 5.8 percent, below the government’s full-year target of 6-7 percent.
Leong said their 2020 GDP forecast for the domestic economy will probably be adjusted upwards to "slightly above 6 percent". (PNA)
