The Philippines spent significantly more dollars than it made in 2017 resulting in the doubling of hard currency outflows which, according to the central bank, points to an economy that is buying more from abroad as it gears up for stronger growth.

In a press briefing, officials of the Bangko Sentral ng Pilipinas said the country’s current account — the total value of exported goods and services, minus the total value of imports — registered a $2.5 billion deficit last year.

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This marks only the second time in the last two decades that the country posted a current account deficit, the other time being in 1999 when the economy was still reeling from the effects of the East Asian financial crisis.

Widening trade-in-goods deficit

“The current account deficit stemmed mainly from the widening trade-in-goods deficit that was brought about by increased imports of goods that support domestic capital formation and production,” BSP Assistant Governor Francisco Dakila Jr. said.

In the fourth quarter of 2017 alone, the current account registered a higher deficit of $3.3 billion due to the widening trade-in-goods deficit with the official explaining that “imports of goods continued to expand in support of the government’s big infrastructure projects that reflect robust domestic economic activity.”

The fourth quarter current account gap was significantly higher than the $566 million deficit recorded in the same period of 2016.

Imports of goods rose by 20.4 percent in the fourth quarter of 2017 to reach $24.5 billion compared to $20.3 billion in the same period of the previous year.

Increments

The double-digit expansion was due to increments registered across all major commodity groups. Leading the growth in imports of goods was raw materials and intermediate goods which grew by 25.6 percent to reach $9.6 billion during the quarter. Growth was driven by increased purchases of semi-processed raw materials, specifically materials and accessories for the manufacture of non-consigned electronics (by 43.9 percent), and manufactured goods (by 26.1 percent).

Exports of goods increased by 2 percent to $11.3 billion in the fourth quarter of 2017 from $11.1 billion in the fourth quarter of 2016. The modest upturn was a result of higher shipments of mineral products, notably copper metal and gold following the rise in export volume along with the increase in their international market prices. Growth in exports of forest, petroleum, and sugar and products was also posted during the quarter.

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However, negative growth was recorded in manufactures, fruits and vegetables, coconut, and other agro-based products.

The large trade deficit in the fourth quarter pushed the full year position of the balance of payments — the aggregate measure of dollar flows into and out of the Philippine economy to a deficit of $863 million in 2017, more than double the $420 million deficit recorded in the previous year.

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