Current account deficit widens to record $7.9B

The country’s current account deficit hit an all-time high last year as robust economic activity resulted in a wider trade gap, the Bangko Sentral ng Pilipinas (BSP) said on Friday.

“The current account deficit rose to an all-time high of $7.9 billion, about 2 percent of gross national income and 2.4 percent of GDP (gross domestic product),” central bank Deputy Governor Diwa Guinigundo told reporters in a briefing.

The 2018 gap was more than triple the $2.143-billion shortfall a year earlier, which was equivalent to 0.7 percent of GDP.

“Prior to 2018, the highest current account deficit was recorded in 1997 at $4.4 billion,” Guinigundo noted.

BSP Department of Economic Statistics director Redentor Paolo Alegre Jr. attributed the record shortfall to the continued widening of the trade gap.

The trade-in-goods deficit rose by 21.9 percent to $49 billion last year, reflective of a 9.4-percent expansion in imports and a 0.3-percent decline in exports.

“Imports growth remain robust which supported the expansion of the country’s potential production capacity,” Alegre said.

“Higher import demand is reflective of the increase in productive economic activity in the country spurred partly by the ‘Build Build Build’ initiative by the national government in 2018,” he added.

This outweighed net receipts in the trade-in-services account, which at $10.5 billion was 20.7 percent higher than the $8.7 billion posted a year earlier.

The current account deficit exceeded the BSP’s expectation of a $6.4-billion shortfall for 2018.

A a major component of the country’s balance of payments (BoP), the shortfall resulted in a BoP deficit of $2.306 billion, wider than the $863 million recorded in 2017 but lower than Bangko Sentral’s $5.5-billion deficit forecast.

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