THE Department of Finance (DOF) expressed confidence at the weekend the Philippine economy will hurdle economic shocks caused by the Covid-19 pandemic.
In the economic bulletin released by DOF over the weekend, Finance Undersecretary and Chief Economist Gil Beltran said the country’s current account in 2019 strengthened in 2019 and “almost wiped out the deficit as strong earnings were achieved from exports of goods and services and incomes from investment placements and remittances.”
The country’s “strong fundamentals,” Beltran said in the bulletin, “will enable the economy to withstand economic shocks arising from the coronavirus pandemic which has locked down more than a third of the economy to a state of inertia.”
This, even though the National Economic and Development Authority’s initially estimated that the economy could contract by 0.6 percent this year. It also said it could also slow to a growth of 4.3 percent. The estimate was based on the initial days of the lockdown imposed to contain the spread of Covid-19.
Fitch Solutions also recently revised its earlier forecast of the country’s current account deficit, which it now sees widening this year to 2.2 percent after its contraction in 2019, as lockdowns globally continue to hinder economic activities. Tourism as well as remittances are also expected to weaken, among others. Fitch Solutions earlier projected the current account deficit to be at 1.2 percent of GDP.
The current account balance refers to the net inflows and outflows of goods, services, income and remittances.
Last year, the Philippines’ current account deficit went down by 95 percent to $464 million —0.1 percent of GDP—from $8.8 billion in 2018 on the back of “lower trade in goods deficits [and] higher net receipts in the trade in services,” according to the data from Bangko Sentral ng Pilipinas.
“This implies higher reliance on domestic savings than on foreign savings such as foreign borrowing and foreign investment. Domestic savings rose due to improved balances in goods and services trade, and higher primary and secondary incomes of Filipinos,” read the DOF bulletin.
Moreover, the deficit in trade in goods and services balance also dropped from 7.62 percent of GDP in 2018 to 6.19 percent of GDP last year as “imports slowed down due to lower capital goods purchases and the country earned higher net receipts from exports of services.”
Surplus in income balances also went up by 7.7 percent but its ratio dipped from 9.25 percent of GDP or $30.592 billion to 9.17 percent of GDP or $32.956 billion. Substantial receipts were attributed to earnings from business process outsourcing firms, remittances inflows and earnings from investments abroad by Filipino citizens.
The primary balance or the country’s earnings from placements abroad less earnings by other countries from local placements grew by 41.4 percent from $3.774 billion in 2018 to $5.336 billion in 2019.
Meanwhile, secondary income balances or remittances accruing to Overseas Filipino Workers less incomes of expatriates remitted abroad also grew by 3 percent from P26.82 billion to $27.62 billion.