Not all deficits are created equal

A celebrated playwright and coincidentally one of the founders of London School of Economics and Political Science (LSE), George Bernard Shaw once famously quipped “If all economists were laid end to end, they would not reach a conclusion.”

Speaking of disagreements, one concept that has been a frequent subject of passionate debate among economists is the implications of current account (CA) imbalances. This is a very timely issue for the Philippines as the country’s CA balance reversed to a deficit, after 13 years of consecutive surpluses.

​Naturally, this triggered concerns among policymakers and economists alike. But what does this really mean and should we really be worried?

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