Trade gap widens as imports surge
A sustained double-digit jump in imports and a continued decline in merchandise exports widened the trade deficit to a record-high $4.02 billion in December.
Preliminary data released by the Philippine Statistics Authority Friday showed that the value of imported goods last December jumped 17.6 percent to $8.74 billion.
On the other hand, exports of Philippine-made goods that month declined 4.9 percent to $4.72 billion.
The total external trade in goods rose 8.6 percent to $13.46 billion in December last year.
The country’s chief economist, Socioeconomic Planning Secretary Ernesto M. Pernia, earlier said that the sustained wider trade in goods deficit was “not good, but transitory and manageable.”
Economic managers have 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.
Under the “Build, Build, Build” program the government plans to roll out 75 flagship, game-changing projects, with about half targeted to be finished within President Duterte’s term, alongside spending more than P8 trillion on hard and modern infrastructure until 2022 to usher in a “golden age of infrastructure.”
The surge in imports, however, 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 $100-million deficit in 2017 from the $600-million surplus in 2016 amid the government’s push to ramp up infrastructure investments leading to a surge in imports of capital goods.
This year, the current account deficit is expected to swell to $700 million.
The state planning agency National Economic and Development Authority nonetheless noted that for the entire 2017, total external trade grew 9.9 percent, surpassing the 5.8-percent growth in 2016.
“Imports and exports posted 10.2 percent and 9.5 percent growth rates, respectively, exceeding the Development Budget Coordinating Committee’s emerging estimates (as of December 2017) of 9 percent for imports and 8 percent for exports,” Neda said in a statement Friday.
To address the lag in exports growth, Pernia said the government should continue to implement strategies that would heighten demand for Philippine-made products to sustain merchandise trade growth.
“We need to effectively respond to market trends and consumer preferences worldwide to drive more demand for Philippine-made products. This can be done by gathering timely and relevant information on emerging demands in potential markets through the help of diplomatic posts and trade attachés,” said Pernia, who heads Neda. “Moreover, intensified market research and tighter linkages with businesses, malls and shopping centers abroad would help increase the visibility of Philippine export products.”
“To drive exports growth, we are also looking at maximizing trade agreements with countries in the region. Export volumes may increase especially for banana, coconut and other agricultural produce by negotiating tariff structures and implementing free-trade agreements to bring down tariffs levied on Philippine agricultural exports in major export markets,” according to Pernia.