Lower current account surplus seen

MANILA, Philippines - DBS Bank Ltd sees the country’s current account surplus declining this year amid the steady decline in export earnings on the back of weak global demand.

The investment bank said the current account surplus is seen hitting $11 billion or equivalent to four percent of the gross domestic product (GDP) this year.

 “The overall current account is set to record another surplus, to the tune of $11 billion this year, about four percent of GDP,” DBS said.

 The Bangko Sentral ng Pilipinas (BSP) sees the country’s current account surplus hitting $14.2 billion this year from $12.6 billion in 2014.

Latest data from the central bank showed the surplus jumped 20.1 percent to $4.69 billion in the first half from $3.91 billion in the same period last year.

DBS sees the country’s export earnings plunging six percent this year and imports inching up four percent, resulting in a wider trade deficit of $10 billion this year.

“Goods exports are likely to plunge six percent this year, while import growth may come in around four percent. No surprise then that the trade deficit widens to $10 billion this year,” it said.

In the first half, the country’s merchandise exports declined 2.7 percent to $50.38 billion from $51.75 billion, while imports retreated 4.5 percent to $45.88 billion from $47.84 billion.

“Talking about export growth, it is also encouraging that exports of electronic products continue to outperform overall export growth,” the bank said.

DBS said the manufacturing sector is increasingly crucial for longer-term GDP growth outlook, especially as the economy continues to diversify away from its dependence on the services sector.

The country’s GDP growth accelerated to six percent in the third quarter from the revised 5.8 percent in the second quarter on the back of robust domestic demand and improved government spending.

Economic managers have given up on the GDP growth target of seven to eight percent as it expects growth to settle between six and 6.5 percent this year.

Amid the slackening exports, DBS said cash remittances from overseas Filipinos would boost the country’s current account position.