Current account gap raises risks

The country's wider current account deficit is raising concerns that the Philippine peso could be vulnerable if global investors turn cautious and foreign capital inflows dry up, according to London-based think tank Capital Economics.

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"Of more concern are the Philippines, Colombia, Chile, Brazil, and Poland, where deficits are larger and widening more rapidly," said Capital Economics chief emerging markets (EMs) economist William Jackson in a Nov. 17 report.

Capital Economics said that while "current account dynamics aren't a sign that currency collapses are on the cards," it cautioned that economies with yawning deficits "would be exposed in the event of a deterioration in risk appetite that slows capital inflows."

"That could cause currencies to sell off, as happened recently in the Philippines amid the corruption scandal, and force policy tightening to reduce imports in order to narrow the external deficit," the think tank added.