ING eyes $450-M C/A surplus

An economist of ING Bank Manila is optimistic that the Philippines will achieve a current account surplus in 2017 after an improvement was registered in the second quarter this year.

Bangko Sentral data showed that the country posted a $15 million surplus from April to June this year, an improvement from the $1.3 billion deficit in same period in 2016 due to higher net receipts in the trade-in-services and primary and secondary income.

In a research note, ING Bank Manila senior economist Joey Cuyegkeng said the CA surplus in the recent quarter “is an upside surprise after two consecutive quarters of deficits.”

“The surplus was achieved despite only modest four percent growth of structural inflows,” he noted.

He forecasts structural inflows such as remittances to recover in the second half of 2017 and boost CA position.

“We are cautiously optimistic that the current account for 2017 will be a surplus of around $450 million or 0.2 percent of GDP,” he said but pointed out that his projection is “a minority view.’’
The central bank’s assumption is a $6 million CA deficit for the year.
In 2016, the  country ended with a $601 million CA surplus, which was about 0.2 percent of GDP. It was lower than year-ago’s $7.3 billion primarily due to higher importation.
Cuyegkeng expects remittances to post a faster growth in the third quarter compared to the two percent expansion in the second quarter of the year.
“The start of 3Q looks promising,” he said, citing the 7.1 percent growth of inflows from overseas Filipino workers in the seventh month this year.
Cuyegkeng said that as of last July, remittance inflows from the US have risen year-on-year by 9.7 percent, Middle East by 6.7 percent and Asia by 9.7 percent., These areas comprise 80 percent of the total.
He said remittance inflows last July reached  “$637 million, more than the month’s trade deficit.”
However, he does not see similar output for August because of negative base effects.