MANILA -- A ranking official of the Bangko Sentral ng Pilipinas (BSP) said domestic growth prospects remain bright, thus, he expects the economy to post a growth of between six and seven percent.
In a briefing Friday, BSP Deputy Governor Diwa Guinigundo said developments in the domestic economy partly reflects the outcome of the country’s balance of payment (BOP) position in the first quarter of the year.
The central bank reported that BOP in the first three months of the year posted a surplus of USD3.8 billion, a turn-around from the USD1.2-billion deficit the same period last year.
It traced the surplus to higher net inflows particularly in the financial account due to increased portfolio inflows, foreign direct investments (FDIs) and other investments.
“The strong performance of the financial account during the quarter was bolstered by favorable investment sentiment attributed to the country’s solid macroeconomic fundamentals and firm economic growth prospects,” the BSP said in a report.
With this output, Guinigundo said these inflows indicate growth of the domestic economy.
“We have shown in many instances, in many cases that the Philippine economy is one of the fastest growing economy despite the 5.6 percent performance of the economy in the first quarter of the year. With better prospects for the second half of 2019 we should be seeing a real economic growth of close to between 6-7 percent,” he said.
The 5.6 percent growth, as measured by gross domestic product (GDP), is slower than quarter-ago's 6.3 percent and year-ago's 6.5 percent.
The central bank official explained that since the Philippine economy has sustained its robust output, domestic savings are now “not enough to fund the requirements of domestic investment and achieve a certain level of economic growth”.
This is the reason for the deficits in the current account, he said, which posted negative growth in recent years after more than 10 years of being in surplus.
Guinigundo said of the big jump in imports, which is due to higher domestic requirements “we have seen the significant expansion in the merchandise trade deficit”.
He, however, said that the current account deficit is not a big issue since this is being countered by the continued inflows of remittances, business process outsourcing (BPO) receipts, and tourist receipts.
“Now, in as much as we have seen the balance of payments in the first quarter of the year turning into a surplus, and this is reflected in the forecast of 2019 and 2020 balance of payments, we see the financiability of the current account deficit,” he said.
Guinigundo said the domestic economy will continue to grow, thus, he expects the trade deficit to continue.
“But the inflows of foreign portfolio investments, foreign direct investments, and even in terms of other investments we’re seeing the financiability of the current account deficit,” he said.
He added that the government’s infrastructure investments are expected to bolster domestic growth further.
“And so later on exports will start recovering and imports will start stabilizing at certain points and we should begin seeing a more, a better on what we’re seeing today, in terms of the current account,” he said. (PNA)
