The Bangko Sentral ng Pilipinas (BSP) will not allow the current account deficit to exceed 1 percent of gross domestic product (GDP) while economic managers ensure that the surge in imports will go to good investments.
“We’re not talking about a blow-away current account deficit. The deficit today is much lower than 1 percent of GDP. And we have no intention to see the current account deficit go higher than 1 percent of GDP,” BSP Governor Nestor A. Espenilla Jr. said during a forum organized by the Economic Journalists Association of the Philippines last Friday.
The BSP has been partly blaming the peso’s slide to almost 11-year lows on market concerns on the current account, which was expected to swing to a $600-million deficit this year from a $600-million surplus last year amid the government’s push to ramp up infrastructure investments leading to a surge in imports of capital goods.
In the first quarter, the current account deficit of $318 million reversed the $730-million surplus a year ago, as the trade-in-goods deficit further widened due to strong imports growth.
“We have to look into what’s driving the current account deficit. What’s behind it is ramping up of investments. These investments, if properly executed, should enlarge our productive capacity and our ability to export and produce goods and services. So we have to look at the current account deficit not as a linear progressive widening but it should correct itself overtime,” Espenilla said.
“It’s really the development process. By definition, the developing country is short of savings and needs a lot of investments. And that’s what we’re doing now, we’re trying to use the savings of the world to accelerate our investment ambitions,” Espenilla added.
For Espenilla, as long as these investments are of “good” quality, “we shouldn’t be in trouble and the situation should remain very manageable.”
To keep the current account deficit in check, Espenilla said the BSP is helping further develop the domestic debt market to promote domestic savings, while economic managers are expected to manage the investment program very well. CBB
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