The country’s balance of payments (BOP) stood as a deficit widening further to $2 billion in the second quarter, the Bangko Sentral ng Pilipinas (BSP) said on Friday.
The expansion from only $1.2 billion a quarter earlier indicates a deterioration in what is left after the country’s foreign currency expenses are deducted from its foreign currency earnings.
This also represents a turnaround from BOP surplus totaling $289 million in the same period last year.
“This development stemmed mainly from the current account, which reversed to a deficit of $2.9 billion as the trade-in goods deficit widened and the net receipts in the primary income account declined,” the BSP said.
“Imports of goods continued to expand driven primarily by increasing domestic production and consumption brought about by the country’s solid growth dynamics,” the BSP added.
Under the current account, the trade-in goods increased to $12.9 billion in the second quarter of 2018 from $9.1 billion in the same period last year.
Exports of goods reduced to $12.8 billion in the second quarter this year from $13.1 billion YoY.
The BSP said this development more than offset the growth in the exports of manufactured goods, which accounts for 79 percent of total good exports.
Data further showed manufactured good exports grew by 2.6 percent, owing to the 24.4 increase in the shipment of non-consigned electronic products, notwithstanding the 86.3 percent decline in exports of wood manufactures.
Furthermore, net receipts on trade-in services improved $2.8 billion in the second quarter this year from $2 billion in the same period year-ago.
Driving the 40.3 percent uptrend was higher net receipts registered in technical, trade-related and other business services; manufacturing services and computer services combined with lower net payments in transport services.
Meanwhile, the country’s financial account recorded $757 million net inflows in the second quarter 2018, a decline from the $908 million in the second quarter of 2017.
Direct investments however, listed $3 billion in net inflows for the quarter, a significant increase from the $1.7 billion in the same period year-ago.
Noting on these results, ING Bank senior economist Joey Cuyegkeng said the higher imports reflect a strong domestic demand “which is likely to be sustained.”
Cuyegkeng further said the pressure from accelerated imports resulted to a wider trade gap on the back of a weak export sector.
“We expect this year’s current account deficit to amount to $7.5 billion to $9.8bn or to a deficit equal to 2.3 percent of GDP to 2.9 percent of GDP,” he said.
He also noted that this imbalance “could deteriorate further and could increasingly weigh on sentiment and on the peso.”
He reiterated that “the (monetary policy) tightening of BSP would likely moderate private sector activity but unlikely enough to keep the current account deficit at below 2 percent of GDP for this year and next year.”
“This underlying external payments weakness underpins the weakening bias of the peso,” Cuyegkeng added.