Fall in August exports sharpest in 2 years

SHARP EXPORT FALL Weak demand for electronic products from key Western markets contributed to the biggest fall of the Philippines’ annual exports in two years last August.

Philippine annual exports in August fell the most in two years, dragged by shrinking demand for electronics and semiconductors from the country’s main trading partners, raising doubts the government will hit its growth forecast this year.

The government has forecast GDP growth at 5 to 6 percent this year, and a 9- to 10-percent increase in exports. However, total shipments in the first eight months grew under 1 percent, with the weakness in exports expected to persist in the coming months on waning demand as the global economy slows.

“Weak demand for electronic products from key Western markets remains the main bugbear, with near 1-percent peso depreciation in the month offering little competitive support to the exporters,” said Radhika Rao, economist at Forecast Pte in Singapore. “Overall data validate the bearish outlook on the external sector for the second half of the year, with full-year growth likely to average in single-digits compared to 35 percent rise last year.”

In 2009, exports shrank 21.9 percent after a 2.8-percent drop in 2008.

Exports, accounting for about two-fifths of the country’s GDP based on expenditure terms, shrank 15.1 percent in August from a year earlier, the steepest drop since September 2009. Compared with the previous month, exports dropped 8.5 percent.

Electronics shipments, which dominate exports, shrank 30.6 percent to $2.07 billion in August from $2.99 billion a year earlier, the statistics office said Tuesday, posting the worst drop since April 2009.

Shipments to Japan, the country’s top export destination in August, rose 7.3 percent from a year earlier, as the Philippines’ Asian neighbor continued rebuilding efforts after a massive quake and tsunami in March.

But orders from other major markets like the United States and China dropped 4.5 percent and 5.4 percent, respectively, from a year ago.

“The outlook remains poor as these trends are likely to persist. Next month should see an especially large fall from the record high reached in September 2010,” said George Worthington, an economist at IFR Markets in Sydney. “The weakness in electronics ensures that the government’s target for export growth of around 9 to 10 percent is unattainable.”

Cid L. Terosa, economist at the University of Asia and the Pacific said, the fourth quarter traditionally has a substantial impact on the full-year growth of exports. However, “I think exports won’t be able to reach the target set for the year,” Terosa said.

Former budget chief Benjamin E. Diokno, who is now with the University of the Philippines School of Economics, said: “It’s time to plan for next year. The exports growth trajectory is awful—it has been on a free fall since September last year.”

Just to generate 5 percent growth this year, Diokno said exporters would have to boost sales by 13.7 percent in the last four months of the year. For electronics exports, a “big winner” in past years, Diokno said it has to “engineer a miraculous growth” of 31 percent in the fourth quarter just to get flat growth from 2010.—Reuters with a report from Riza T. Olchondra