Philippine exports seen to decline in months ahead

The volume of electronics exports may further contract in the months ahead as local manufacturers report declining orders from customers abroad, according to the Bangko Sentral ng Pilipinas.

The sluggish economy of the United States and the debt problems of eurozone nations—the Philippines’ key export markets—resulted in waning global demand for electronics, the country’s major export product, the central bank said.

Data from the BSP showed that, at the end of June, the book-to-bill ratio for the electronics industry fell below the threshold of 1 to 0.94.

Book-to-bill ratio provides an idea on how sales of electronic products are doing. It is computed as the percentage of the value of orders, which indicates future sales, to the value of invoices sent, indicating sales recently made.

A book-to-bill ratio below 1 suggests a potential decline in revenue because there are fewer orders booked compared with sales made in the past.

In the second quarter, exports of electronic goods, which account for about 60 percent of total export earnings of the Philippines, amounted to $6.5 billion. This marked a significant 18.4-percent drop from the $7.97 billion reported in the same period last year.

Analysts said electronics exporters should prepare for further decline in sales, as indicated by the latest book-to-bill ratio.

The Philippines manufactures and ships out intermediate electronics products, particularly those used for the production of personal and laptop computers, IPods and cellular phones, among others.

Analysts said that, in times of economic crunch, people tend to focus spending on basic goods and forego non-essential items, such as electronic goods.

The vulnerability of electronics exports to the economic performance of industrialized countries is the reason why Filipino exporters are urging the government to help them become more competitive through further diversification of their markets and products.

Over the past decade, the dependence of the Philippines on the United States as an export market has been declining. The United States now accounts for about 14 percent of the Philippines’ export earnings, compared with the 30 percent reported 10 years ago.

Nonetheless, exporters are encouraged to further reduce the share of Western economies in their export income by exploring other markets, especially those in Asia, which is currently driving growth of the global economy.

The BSP said the quality of products and service delivery should also be enhanced so that Filipino exporters could win more customers abroad.

Also, the central bank said the Philippines should strengthen domestic demand to make up for weak exports.

To boost domestic demand, extra efforts must be made to encourage fund owners to invest more in industry so that income levels, and thus domestic demand, will rise, according to the BSP.