Exports slide to record low in May

The steep drop in exports as well as domestic manufacturing last May were signals that the global economy was once again slowing down mainly due to economic troubles in Greece and China, the National Economic and Development Authority (Neda) warned Friday, although it remains to be seen how these external shocks would affect the Philippines.

Slower exports to date would also put the country’s economic growth target at risk, Barclays Bank PLC also said Friday.

“We believe the weakness in both April and May exports add downside risks to our 6.5-percent 2015 growth forecast, following the very weak first-quarter GDP [gross domestic product] print,” the UK-based banking giant said.

Economic growth slowed to 5.2 percent in the first quarter—the lowest since 2012, on the back of government underspending, coupled with weak exports.

For 2015, the government targets a GDP growth rate of 7-8 percent, with exports seen growing by 7 percent.

A preliminary Philippine Statistics Authority (PSA) report showed that merchandise exports in May slid by 17.1 percent year-on-year to $4.9 billion, which Neda noted was the steepest drop since December 2011.

“The Philippines recorded the largest decline of export revenues among major trade-oriented economies in East and Southeast Asia” last May, Neda added.

Total export sales from January to May were down 5 percent year-on-year to $23.53 billion.

“The recent outturn of Philippine exports, as well as in many Asian economies, reflects the general market outlook and consensus in the near term, signaling a slowdown of the global economy,” Neda deputy director-general and officer in charge Emmanuel F. Esguerra said in a statement.

“Slowdown in global trade due to the weakening of China as well as the fiscal crisis in the euro zone will certainly spill over globally, although the magnitude of the impact remains to be seen. Policymakers should remain vigilant on the possible outcome of these external developments and how they may impact the trade competitiveness of the country as well as the domestic economy,” Esguerra added.

Outbound shipments of manufactured products, such as electronics, machinery and transport equipment, semiconductors and wood manufactures, among others, declined by 9.5 percent in May—the biggest monthly drop so far this year, because of “lackluster global demand,” Esguerra explained.

Exports of minerals as well as agro-based goods went down even faster, by 66.5 percent and 32.3 percent, respectively, year-on-year.

“The Philippines’ export performance is likely to remain constrained by volatilities in the international markets triggered by the Greek debt crisis and the slowdown in China. Given that these external shocks cannot be prevented, government measures to mitigate the possible negative effects should be immediately implemented as warranted,” Esguerra said.

“As the external environment continues to be unfavorable and fragile, strengthening domestic demand should be a priority,” he added.

But last May, the country’s factory output, as measured by the Volume of Production Index or VoPI, also contracted by 3.1 percent, reversing the robust 12.7-percent growth posted a year ago.

The Value of Production Index or VaPI, meanwhile, dropped by 7.3 percent, compared with an 11.4-percent increase last year, the latest Monthly Integrated Survey of Selected Industries or Missi report showed.

Neda likewise blamed the slower manufacturing activities to weak global demand, coupled with the dry spell brought about by El Niño.