The Bangko Sentral ng Pilipinas on Friday said it is expecting the country’s current account deficit to widen to a record high of $20.6 billion for 2022 mainly due to a surge in importation costs.
The current account represents the sum total of all money inflows and outflows. A deficit indicates more money is leaving the Philippines as payment for imported goods and services.
“$20.6 billion will be even higher, will be the record high. But again we need to import all these goods in order to increase capacity in the economy. In doing so, we are able to grow faster, and all of these things will in the long run balance itself out,” BSP Senior Director Paolo Alegre said.
“We shouldn’t be too worried about current account deficits or trading goods deficits, since we have enough buffers in the first place, and structural factors such as remittances, BPO revenue…all those will support or neutralize all of these temporal effects on the trade, current account, specifically stemming from Ukraine Russia and monetary tightening in advanced economies,” he added.
The Gross International Reserves of the Philippines is seen hitting $99 billion, lower compared to previous years and an earlier forecast of $105 billion, but still adequate according to the central bank.
The import bill grew 27.5 percent year-on-year in the first half of 2022, and it is expected to grow 20 percent year-on-year for the full year. This was attributed by the central bank to the surge in cost of imported oil and other fuels.
In contrast, export growth was only 7.9 percent in the first half, and this is expected to slow further to a full year average growth of just 4 percent by the end of 2022. But the expected strength in Business Processing Outsourcing and Travel Receipts will help soften the blow, the BSP said.
BPO receipts are seen hitting a 9 percent growth this year, from an earlier forecast of just 8 percent.
Travel receipts growth is also expected to grow by 250 percent, from an earlier forecast of just 100 percent. The increase in tourism income however, is partly due to a low base, as there was no income for this sector last year.
Meanwhile, the weakness of the Philippine peso against the US dollar is seen as a big positive for tourism, as this has made the Philippines a more affordable destination for foreigners.
The peso fell to its all-time low on Friday, after closing a P57.43 to a dollar.
But even as the peso weakened to a record low, the level remains manageable, BSP’s Department of Economic Research Director Sittie Butocan said.
“The year to date peso dollar exchange rate is at P53.3 to the USD which is still in line with the higher end of the P51 to P53 assumption against the US dollar by the DBCC. Of course at anytime the DBCC may also discuss the macro economic assumptions and we will factor this in,” Butocan added.
