Fitch caps CA at 2.4% GDP

We expect imports to rise somewhat in the second half of 2019 with the passing of the budget.

The projected shortfall in the country’s current account (CA) is capped this year at 2.4 percent of local output measured as the gross domestic product (GDP), according to sovereign debt watcher Fitch Ratings.

“We expect the current account to remain in a deficit at about 2.4 percent of GDP in 2019, driven by weak export performance,” Fitch said.

The current relates to the net transfer of real resources between the local economy and the rest of the world that by deliberate government planning should widen this year as consequence of the “Build Build Build” program of government.

Monetary officials such as the recently retired Deputy Bangko Sentral ng Pilipinas (BSP)Governor Diwa Guinigundo have since brushed off concerns over the imbalance, saying current account deficit remains financeable given the anticipated receipts from tourism activities, the business process outsourcing sector and the remittances of millions of overseas Filipinos.

The debt watcher took note of the 0.5 percent contraction in exports reported in the first six months this year, which compared against the 1.1 percent export growth in the same period last year.

Likewise, imports saw a drop during the first half, which was owed primarily to the delayed passage of the 2019 national budget that in turn had a dire impact on government’s infrastructure spending program and the projected boost to overall growth.

Despite the reduction in imports, the credit watchdog expects the sector to recover given the delayed adoption of the 2019 budget.

“We expect imports to rise somewhat in the second half of 2019 with the passing of the budget. The agency expects subdued export performance and generally strong import growth in 2020 and 2021 to keep the current account in a deficit of between 2.5 percent to 2.6 percent of GDP,” it said.

Earlier, the BSP reported a narrower current account deficit of $1.7 billion in the first six months of the year. This compared against the $3.8 billion deficit in the same period last year.

The BSP projects the current account deficit this year to widen to $10.1 billion, equal to 2.8 percent of GDP.