Rising oil prices will continue to worsen the Philippines’ trade balance and current account, although improvements are expected with a “slow” economic recovery, according to ANZ Research.
Other threats to the trade balance include disruptions to domestic production and physical constraints on exports, he added.
“These (constraints) are powerful enough to offset the impact of planned public infrastructure spending on imports,” said Sanjay Mathur, ANZ chief research economist for Southeast Asia and India in a note.
According to the Philippine Statistics Authority, the trade deficit stood at $ 2.76 billion in May, lower than the $ 3.08 billion deficit recorded in April but higher than the $ 1.31 billion deficit recorded a year earlier. early.
The current account was in deficit of $ 614 million in the first quarter, a reversal from the surplus of $ 225 million a year earlier, according to the central bank.
The current account includes flows linked to trade in goods and services; Filipino workers’ remittances abroad; profit from Filipino investments abroad; interest payments to foreign creditors; as well as gifts, grants and donations to and from abroad.
Mr Mathur said the impact of rising oil prices has been “particularly harsh” and is already reflected in the growth of imports even as the country has yet to see a “significant” reopening of its economy. .
Imports rose 47.7% to $ 8.65 billion in May from the previous year.
Despite the risk of rising oil prices, Mathur said trade is expected to improve. The Philippines will also benefit from the continued rebound in remittances as well as revenues from the business process outsourcing (BPO) industry, he added.
“The outlook for remittances and BPO revenue is also improving as the economies of the Middle East and Europe recover. Remittances from these two geographic areas suffered the most last year, ”said Mathur.
On Tuesday, the central bank said remittances rose 13% year-on-year in May to $ 2.382 billion. This is the fourth consecutive month of growth in remittances and the largest increase since the 18.5% recorded in November 2016.
Mr. Mathur said BPO companies would likely benefit from the upturn in economic activity in the United States, as 60% of the local BPO industry’s revenue is generated in this country. – Luz Wendy T. Noble