Widening trade gap seen a risk to growth

Economic managers are worried about the current exports slump despite the fast growth in imports.

In a recent presentation before the Senate finance committee, Socioeconomic Planning Secretary Ernesto M. Pernia said among the domestic downside risks to growth include the widening trade deficit.

“Imports have been growing faster than exports so we need to watch out. We don’t want the trade gap to explode,” said Pernia, who is also the Director General of the National Economic and Development Authority (Neda).

Merchandise imports jumped 17.7 percent year-on-year to $38.7 billion in the first half, whereas end-June exports dropped 7.5 percent to $26.8 billion, the latest Philippine Statistics Authority data showed. This meant a trade deficit of $11.9 billion.

Pernia said the deficit was expected “to be there for sometime.”

“A trade deficit is something normal for developing countries because there is a need to import a lot of things—not just consumer goods but also capital goods. Given that our imports of capital goods have been very high, then we can expect that the investment component of the gross domestic product (GDP) will be strong,” the Neda chief told reporters last week.

In a note to clients last month, Bank of the Philippine Islands associate economist Nicholas Antonio T. Mapa said the “chronic” trade deficit was “one of the reasons why we’ve navigated the global economic slump so steadily as we rely on other sources for growth and foreign currency.”

Mapa believes, however, the deficit would narrow in the coming months as “capital goods importation winds down while export growth simply draws down on existing inventory of imported raw materials.” Ben O. de Vera