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The Philippine central bank on Friday raised its balance of payments projections for this year and 2021 amid a protracted coronavirus pandemic, as the country’s current account returned to a surplus of $ 4.1 billion in the third quarter.
The surplus came as the goods trade deficit fell and net income from secondary income increased, offsetting lower net income from primary income and trade in services, Bangko Sentral ng Pilipinas (BSP) said in a statement.
The current account surplus for the last quarter was a trend change from the deficit of $ 456 million in the third quarter of last year, but less than the surplus of $ 4.4 billion in the second quarter.
“The latest balance of payments assessment for 2020 reflects the apparent background of the impact of COVID-19 in the second quarter of 2020,” the BSP said in a statement. “While recent external account figures remain below the pre-pandemic trend and still in negative territory, they are expected to improve from the first half of the year,” he added.
The payment position is expected to post a surplus of $ 12.8 billion in 2020, equivalent to 3.4% of economic output and higher than its previous estimate of P8.1 billion.
This largely reflects the general balance of payments position of $ 10.3 billion in the 10 months to October, supported by higher external loans from the national government and a lower merchandise trade deficit, the central bank said.
By 2021, the main balance of payments accounts are expected to show continuous improvements, but could still remain below pre-pandemic levels, the central bank said. “The general position of the balance of payments is projected at $ 3.3 billion in 2021, mainly attributed to the expected moderation of the current account surplus next year.”
The central bank said it had increased its projected current account surplus to $ 8.4 billion, or equivalent to 2.3% of gross domestic product (GDP) this year from the estimate of $ 6 billion in October.
This is expected to drop to $ 6.1 billion or 1.5% of economic output next year, higher than the previous estimate of $ 3.1 billion or 0.8% of production.
The BSP expects a “sustained surplus in the current account in the medium term, but one that will moderate as the economy recovers and imports also recover,” Lieutenant Governor Francisco Dakila, Jr. told an online press conference.
Holding more outflows than inflows could bode well for economic growth when imports were strong before the pandemic, as the Philippines is a net importing country and has been running a current account deficit in the past, said Ruben Carlo O. Asunción, chief economist at UnionBank of the Philippines, Inc.
“This means that a surplus may not be good in a crisis and that the challenge is to get the economy moving again to a point where the current account is set to a healthy deficit,” he said in a Viber message.
Data from the BSP showed that the goods trade deficit narrowed to $ 4.227 billion from $ 8.605 billion. Primary income fell 15.7% from the previous year to $ 1,061 billion, while secondary income increased by 4.1% to $ 7.28 billion.
In the nine months through September, the current account balance posted a surplus of $ 8.7 billion from a deficit of $ 3 billion a year ago, it said in a separate statement.
The central bank attributed the surplus to a fall in the goods trade deficit, which offset lower net income from trade in services, primary and secondary income.
The current account shows the economic interaction of the country with the rest of the world. It includes trade in goods and services, remittances from migrant Filipino workers, earnings from Philippine investments abroad, interest payments to foreign creditors, and gifts, grants, and donations to and from abroad.
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