Strong imports growth that outpaced the increase in exports brought the trade-in-goods deficit in October to its widest on record, at $2.845 billion, the government reported Tuesday.
The value of imported products that entered the country rose for the third consecutive month in October, jumping 13.1 percent to $8.211 billion from $7.26 billion a year ago, preliminary Philippine Statistics Authority (PSA) data showed.
Exports also grew but by a slower 6.6 percent to $5.366 billion from $5.036 billion last year, posting the 11th straight month of year-on-year growth.
As such, total trade in October climbed 10.4 percent to $13.578 billion from a year ago’s $12.296 billion.
As imports growth and value exceeded those of exports, the total balance of trade in goods that month remained at a deficit and further increased from last year’s $2.224 billion.
“The trade deficit recorded in October was the largest monthly deficit since data compilation in 1991,” Socioeconomic Planning Secretary Ernesto M. Pernia said in a text message.
An economist at a leading bank noted that the jump in imports that month was driven by double-digit growth in capital goods, fuel and construction materials.
“There were lots of capital expenditures, but a deceleration from the past two years as power generation equipment was showing negative growth year-to-date,” the economist added.
Economic managers had said that as the Duterte administration embarks on its ambitious “Build, Build, Build” infrastructure program alongside expectations of sustained strong economic growth, demand for imports would remain robust in the near term.
The surge in imports, however, had reversed the current account to a deficit, which had the market worried and pulled the peso weaker in recent months.
A component of the balance of payments, the current account was expected to swing to a $600-million deficit this year from a $600-million surplus last year amid the government’s push to ramp up infrastructure investments leading to a surge in imports of capital goods.
The state planning agency National Economic and Development Authority nonetheless quoted Pernia as saying that “for 2018, we are looking at improved performances in exports of agricultural products and semiconductors, which continue to comprise a huge portion of Philippine exports.”
Amid greater trade facilitation and recently signed free trade agreements in which the Philippines was part of, such as the Asean-Hong Kong Free Trade Agreement as well as the Asean-Hong Kong Investment Agreement, “Philippine exports will likely remain in the positive territory and should pick up due to higher demand during the holiday season,” said Pernia, who is also the Neda chief.
However, the PSA’s Monthly Integrated Survey of Selected Industries for October 2017 showed that the Volume of Production Index (VoPI), a proxy for manufacturing output, declined 6.5 percent year-on-year that month, reversing the 9.9-percent growth a year ago.
“Chemical products contributed significantly to the decrease at 61 percent. This was followed by four other major sectors registering two-digit decline in VoPI, namely: tobacco products (down 39.4 percent), textiles (down 28.3 percent), footwear and wearing apparel (down 27.5 percent) and paper and paper products (down 18.9 percent),” the PSA explained.