January 11, 2025 | 12:00am
MANILA, Philippines — Nomura Global Markets Research has raised its current account deficit (CAD) forecast for the Philippines over the next two years, citing external pressures expected to weigh on the country’s economy.
In a report, Nomura economists Euben Paracuelles and Nabila Amani said that they had revised their 2024 and 2025 CAD forecasts to -2.9 percent (from the original target of -2.3 percent) and to -3.1 percent (from -2.5 percent), respectively.
“We continue to expect the CAD to rise, given the mix of improving domestic demand with higher external pressures. Our CAD forecast revisions take into account a higher-than-expected outturn in the third quarter,” they said.
Based on data from the Bangko Sentral ng Pilipinas (BSP), the country’s CAD widened to $5.7 billion in the third quarter of 2024, more than double the $2.2 billion shortfall in the same quarter a year ago.
At $5.7 billion, the current account deficit is equivalent to -5.2 percent of the country’s gross domestic product, larger than the -2.2 percent of GDP recorded in the third quarter of 2023.
In the first nine months of 2024, the CAD further rose by 19.4 percent to $12.9 billion (-3.9 percent of GDP) from $10.8 billion (-3.5 percent of GDP) in the same period in 2023.
The BSP also revised its current account targets upwards to $10.4 billion (-2.2 percent of GDP) in 2024 from the $6.8 billion deficit (-1.5 percent of GDP) projection given in September last year.
For 2025, the central bank’s forecast for the country’s CAD stands at $12.1 billion or -2.4 percent of GDP, higher than the $5.5 billion or 1.1 percent of GDP previously.
According to Nomura, the implementation of more infrastructure projects supports the growth outlook but also suggests a widening of the current account deficit and still-high fiscal deficits.
Nomura expects the country to grow by six percent in 2025 from an estimated 5.6 percent in 2024, hitting the low end of the government’s latest forecast range of six to eight percent growth for the year.
“We think public investment spending will remain a significant growth engine, as the government pushes for more progress on infrastructure projects with an added impetus from the midterm elections on May 12,” Paracuelles and Amani said.
They also said that sustained infrastructure implementation should start to attract more private investment spending when borrowing costs are declining and BSP is easing monetary policy.
The central bank is expected to slash borrowing costs by a total of 75 basis points this year, bringing the key rate to five percent from the current 5.75 percent level.
Nomura said the rate cuts would be delivered in the first three meetings of the year starting on Feb. 20, despite a more hawkish US Federal Reserve.
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