PH needs to maintain fundamentals—DOF
The Department of Finance (DOF) said the Philippines needs to maintain its good economic fundamentals to allow the nation to recover promptly as the pandemic-induced lockdowns continued to ease.
Finance Undersecretary Gil S. Beltran said this means the government should maintain the budget deficit and balance-of-payments manageable, as well as keep interest rates at the level that sustains investments.
Beltran also said that inflation should remain at the lower end of the Bangko Sentral ng Pilipinas’ (BSP) target.
Meanwhile, the finance official said the current account balance reverted to a surplus in the first three-quarters of the year, a reversal of the deficit a year ago amid slowing economy that also brought down import demand with it.
As a result, Beltran said the peso strengthened from end-2019 level of P50.8 against the US to P48.1 as of mid-December this year.
The current account in the balance-of-payments rose to a surplus of $8.7 billion or 2.4 percent of gross domestic product (GDP) in January to September 2020 from a deficit of $3.0 billion (0.8 percent) in the same period last year. This is due mainly to the lower deficit in trade in goods, Beltran said.
Current account is the balance of exports and imports of goods, services and income balances. This is the equivalent of the investment-saving gap, an indicator closely monitored by credit rating agencies.
“This indicates that the economy is back to a net lender status (as opposed to being a net borrower in the previous year) despite increased borrowing by the government,” Beltran said.
The deficit in the trade in goods balance dropped from 9.6 percent of GDP in the first three quarters of 2019 to 6.4 percent this year as imports slowed down due to negative economic growth.
The surplus in the trade in services and income balances dipped slightly in US dollar term from $33.8 billion to $32.2 billion but as a percentage of GDP, it remains at 8.8 percent.
Primary income balance which is accounted for by the country’s earnings from placements abroad less earnings by other countries from local placements dropped from $3.8 billion to $3.2 billion as global businesses suffered a slump from the COVID-19 pandemic.
On the other hand, secondary income balance, which is represented by remittances accruing to OFWs less income of expatriates remitted abroad, slipped from $20.3 billion to $20.0 billion.