The Philippines’ current account deficit could narrow this year on the back of milder inflation and improved economic activity, an economist said after the Bangko Sentral ng Pilipinas (BSP) reported the balance of payments at end-2024 hit its widest gap on record.
The trade deficit by the end of last year has grown to $17.5 billion, widening from $12.4 billion in 2023.
Faster economic growth and lower prices of commodities will have a positive impact on narrowing the country’s trade deficit this year, RCBC chief economist Michael Ricafort told Malaya Business Insight over the weekend.
The end-2024 gap of $17.5 billion is equivalent to 3.8 percent of gross domestic product (GDP) in January to December last year, the BSP said on Friday.
It was the second widest gap on record over the last four years, or since the country registered $18.3 billion in current account deficit in 2022.
The current account measures a country’s transactions with other countries, including goods and services, income and transfers. A current account deficit results when a country’s total payments to other countries for imports, investment, and services exceed the total payments it received from other countries.
Ricafort said the wider current account deficit came as a reflection of the trade deficit in 2024.
Although the 2024 trade deficit was somehow offset by continued growth in OFW remittances, BPO revenues, foreign tourism receipts, among others, “increased merchandise imports widened the trade deficit,” Ricafort said.
Data from the Philippine Statistics Authority showed the Philippines posted a trade deficit of $4.01 billion for December.
Imports in December declined 5.1 percent to $9.8 billion from a year earlier, while exports eased 0.5 percent to $5.8 billion.
“For the coming months, lower major global oil and commodity prices would
help temper the trade deficit, but offset by faster economic growth,” Ricafort said, adding that more infrastructure spending is expected as part of economic activity in the country.
Since the fourth quarter of 2024, the current account deficit has reached $4.6 billion, or 339.3 percent wider than the $1.0 billion deficit in October to December 2023.
The deficit was driven by a larger merchandise trade gap and lower net receipts in trade in services and primary income accounts, the central bank said.
“However, this was partially offset by higher net receipts in the secondary income account,” it said.
Q4 BOP gap vs yr-earlier
The country’s balance of payments (BOP) position recorded a deficit of $4.5 billion in the fourth quarter of 2024, a turnaround from a surplus of $1.9 billion posted during the same period in 2023.
The BOP measures the country’s economic transactions with the rest of the world in a given period.
The BSP also said capital account recorded net receipts amounting to $72 million in 2024, which was 2.9 percent lower than the $74 million recorded in 2023, on the back of lower net receipts from the national government’s other capital transfers at $67 million from $70 million.
