Current account gap widens in Q1

MANILA, Philippines —  The country’s current account deficit more than doubled in the first quarter, driven by a wider trade gap and weaker service exports, according to the Bangko Sentral ng Pilipinas (BSP).

The current account deficit surged by 105.1 percent to $4.2 billion from January to March compared to a shortfall of $2.1 billion in the same period last year. This is equivalent to -3.7 percent of the country’s gross domestic product (GDP).

“This development reflected the widening merchandise trade gap and the contraction of net receipts in trade in services,” the BSP said in its latest balance of payments report.

The current account is a key component of a country’s balance of payments. It measures the flow of goods, services, income, and current transfers in and out of the economy. A deficit means the country is spending more on foreign trade and income payments than it is earning, often indicating stronger demand for imports or capital outflows.

The central bank said the trade in goods deficit alone widened to $16.8 billion in the first quarter from $14.7 billion a year ago, as import growth outpaced exports.

Imports grew by eight percent to $31.5 billion, driven by higher shipments of telecom equipment, vehicles and food oils. Exports rose marginally by 1.2 percent to $14.7 billion, lifted by stronger demand for coconut oil and other manufactures.

Meanwhile, net receipts from trade in services dropped by 9.3 percent to $3.3 billion, mainly due to lower earnings from transport services and increased resident spending on outbound travel.

On the other hand, remittances and investment income improved in the first quarter, but these gains were not enough to offset the pressures on the current account.

Net receipts in the secondary income account, which includes remittances from overseas Filipino workers, climbed by 1.7 percent to $7.7 billion. Primary income receipts also improved by 14.6 percent to $1.5 billion due to stronger dividend and interest earnings.

The wider current account shortfall pulled the country’s overall balance of payments position into a deficit of $3 billion in the first quarter, reversing the $238 million surplus in the same period last year.

The financial account posted higher net inflows of $6.7 billion, up 43.2 percent year-on-year, as investor sentiment improved following the Philippines’ removal from the Financial Action Task Force gray list.