Philippine exports still outperform imports, further shrinking trade deficit

08, Aug. 2019

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MANILA, NNA – Philippine exports edged up in June with their growth outperforming imports for the third straight month, further shrinking the trade deficit to the narrowest in over a year, data released by the Philippine Statistics Authority on Wednesday showed.

The Philippines’ total external trade in June amounted to $14.49 billion, down 5.8 percent from a year ago. The Philippine National Economic and Development Authority attributed the slowdown in external trade to the ongoing trade war, uncertainties over Brexit and geopolitical tensions.

Key points:

―― Exports totaled $6.01 billion in June, up 1.5 percent on year. The increase was led by cathodes and sections of cathodes, of refined copper (+41.7 percent), fresh bananas (+24.4 percent), ignition wiring sets and other wiring sets used in vehicles, aircrafts and ships (+17.6 percent), and gold (+10.1 percent), among others goods. Electronics, the Philippines’ top export item, saw shipments of $3.54 billion, up 4.3 percent from a year earlier.

―― Imports declined sharply by 10.4 percent to $8.48 billion in June from a year ago. The drop was due to reduced purchases of iron and steel (-40.3 percent), cereals and cereal preparations (-29.4 percent), industrial machinery and equipment (-20.7 percent), plastic in primary and non-primary forms (-16.4 percent), and transport equipment (-12.6 percent), among others.

―― Aside from trade tensions and the slowing economy of China, Michael Ricafort, economist at local lender Rizal Commercial Banking Corp., told NNA the decline in imports may also be attributed to the “government’s underspending from January-June 2019 that slowed down the purchases of imports used for various infrastructure projects, and slower growth in loans in recent months since loans are also used to finance the purchases of imports.”

―― Year-to-date, exports declined 0.8 percent to $34.11 billion on year, below the government projection of 2 percent for this year. Imports were also down by 1 percent to $53.12 billion from a year ago, also below the government forecast of 7 percent.

―― The continued decline in imports narrowed the Philippines’ trade deficit to $2.47 billion in June from the $3.55 billion in the same month last year. The June data is the narrowest since the $2.34 billion posted in March 2018.

Takeaway:

―― Despite the trade slowdown, NEDA remains optimistic about the country’s resilience in its trade performance, noting the Philippines is among the countries in Asia with positive export growth.

―― Considering the uncertainty in global trade, Socioeconomic Planning Secretary Ernesto Pernia pointed out the need to diversify markets, among other factors, to compensate for the weak external trade, by establishing new trade ties and improving existing ones.

―― “In light of the current trade spat between (South) Korea and Japan, we need to complete the negotiations for the free trade agreement with South Korea and review the decade-old Philippines-Japan Economic Partnership Agreement to further expand the country’s exports in both markets,” Pernia was quoted in a NEDA press release as saying.

―― Meanwhile, Ruben Carlo Asuncion, chief economist at the UnionBank of the Philippines, told NNA in an email the positive growth in exports may be challenged as the global economy continues to show signs of slowing down due to the U.S.-China trade dispute. He also noted imports are expected to recover in the coming months as the government fully resumes its spending.

―― “This will drive imports higher, and the trade balance is expected to grow a larger deficit as 2019 ends,” he said.