The International Monetary Fund (IMF) expects the Philippines' current account deficit to narrow this year.
“The current account deficit is expected to shrink from 3.8% of GDP in 2024 to 3.4% of GDP in 2025 and shrink with weaker commodity prices,” said the IMF mandate head Elif Arif Arbatli Saxegaard in a statement.
The latest data from Bangkok Sentral NG Pilipinas (BSP) shows that the current account deficit last year expanded from $12.4 billion in 2023 to $17.5 billion. This brings the current account to 3.8% in 2024 from 2.8% in the previous year.
The central bank expects the current account deficit for transactions involving goods, services and revenues to reach $19.8 billion this year, or 3.9% of GDP.
Ms. Saxegaard also noted that although the country's total international reserves (GIR) fell since its record international reserves (GIR) in September, the US dollar reserve levels remained sufficient.
BSP data shows that the Philippines' GIR fell 1.9% to $1004.6 billion as of the end of April, from the end of March to the end of March. Dollar Reserves hit a record $112 billion in September 2024.
Meanwhile, multilateral agencies said that it is still crucial for the Philippines to adhere to the path of medium-term fiscal merger.
It also requires “continuous durable efforts to mobilize taxes and ensure efficiency in government spending.”
Ms Saxgaard said the government's fiscal stance could be widely neutral this year.
“The medium-term fiscal consolidation remains appropriate and should be given a sustainable plan to increase taxation and implement expenditure reforms to ensure that deficit targets are met and more room for priority spending.”
According to the latest Development Budget Coordination Committee (DBCC), NG has limited its deficit cap to 5.3% of GDP this year.
“Tax reforms can prioritize increasing consumption tax, improving VAT efficiency, improving tax management and ensuring effective control of tax benefits. Efforts to strengthen public financial management and manage fiscal risks should continue.”
“In line with the higher income allocated to them during the decentralization process, increasing the capacity of local governments to implement additional expenditure responsibilities is crucial to support growth,” she added.
Ms. Saxegaard led an IMF team during a meeting in Manila from 14 to 20 May.
She said the IMF will continue the dialogue in this year's fourth consultation in the coming months. – Luisa Maria Jacinta C. Jocson
