MANILA, Philippines — The rehabilitation of Boracay island is likely to boost the country’s external payments position in the long term through a more sustainable tourism industry, according to the Bangko Sentral ng Pilipinas.
BSP Deputy Governor Diwa Guinigundo said the impending six-month closure of the world-renowned tourist island would involve short-term costs of forgoing immediate tourist receipts.
“But over the long term, it should result in a more sustainable tourism industry. That should be expected to bring in more and more substantial income that could further support the external payments account,” Guinigundo said.
Boracay is known for its turquoise waters and powdery white sand and has consistently ranked among the favorite destinations for tourists in the world.
The province of Aklan, where Boracay is situated, registered a 14.3-percent increase in tourist arrivals to 2.2 million last year from 1.94 million in 2016.
However, tourism and development have taken a toll on its environment, with some establishments accused of discharging waste water into its surrounding waters and improperly disposing of their garbage.
Dismayed by the environmental degradation of the popular holiday destination, President Duterte, who at one point compared
Boracay to a “cesspool,” ordered its closure for six months starting April 26.
The rehabilitation period would provide local officials time to fix the islands sewage system and roads, as well as to remove structures built on the island’s forest and wetlands.
Inflows from tourism receipts, remittances from overseas Filipinos, and earnings of the business process outsourcing (BPO) sector provide the Philippines with the necessary foreign exchange buffers to survive external shocks.
The BSP sees the current account (CA) posting a deficit of $700 million or 0.2 percent of gross domestic product (GDP) this year due mainly to the expected faster rate of growth in imports compared to exports.
Goods exports are projected to grow nine percent as the pace of Chinese economic growth could moderate progressively in 2018 and beyond, while shipments of imported goods are expected to rise 10 percent, propelled by higher Philippine GDP growth prospects and the expected increase in imports of raw materials and manufactured goods amid increased government investments in infrastructure consistent with the Build Build Build program.
The CA position measures the net transfer of real resources between the domestic economy and the rest of the world. It consists of transactions in goods, services, as well as primary and secondary income.
The Philippines CA shortfall doubled to $2.5 billion or 0.8 percent of GDP last year from the revised $1.2 billion deficit or 0.4 percent of GDP booked in 2016 as more US dollar flowed out of the country on the back of strong capital outflows and robust imports.
This was the highest since the CA shortfall amounted to $2.87 billion or 3.5 percent of GDP in 1999.
The widening CA deficit is one of the factors behind the weakening of the peso against the US dollar due to rising demand for the greenback to support increasing imports.
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