The country’s chief economist is pushing for service exports such as tourism to compensate for the expected sustained decline in merchandise exports amid a looming global economic slowdown.
“Given the downbeat prospects for merchandise exports, we should really ramp up our service exports, especially tourism, where we have a natural advantage,” Socioeconomic Planning Secretary Ernesto M. Pernia told the Inquirer Friday.
Another major service export of the Philippines is the business process outsourcing industry.
World Bank data showed that the Philippines’ service exports continued to climb, from $20.4 billion in 2012 to $23.3 billion in 2013, $25.5 billion in 2014, $29.1 billion in 2015 and $31.4 billion in 2016.
Last week, the World Bank warned that “exports, a key driver of growth for the Philippines’ economy, are projected to moderate in the coming years as global growth is expected to decelerate.”
Citing its June 2018 Global Economic Prospects report, the Washington-based multilateral lender noted that the “projected a gradual global slowdown over the next two years, predicated on moderately higher commodity prices, strong but gradually moderating global demand, and incremental tightening of global financing conditions.”
“Uncertainty around global growth conditions has risen, with the possibility of trade and other policy shocks emerging from major economies,” the World Bank said.
The Philippines’ overall exports were declining from $61.8 billion in 2014 to $58.6 billion in 2015 and $56.3 billion in 2016, World Bank data showed.
The latest government data showed that merchandise exports from January to May declined 5 percent to $26.9 billion from $28.3 billion in the same five-month period last year.
In contrast, end-May imports jumped 11 percent to $42.7 billion from $38.5 billion a year ago.
As such, the trade-in-goods deficit as of May widened to $15.8 billion from $10.2 billion in the first five months of last year.
In a note to clients last Friday, London-based Capital Economics attributed the rapid imports growth to “a surge in imports of capital goods, which are being used as part of President Duterte’s infrastructure drive,” referring to the ambitious “Build, Build, Build” program.
“The widening of the deficit has put pressure on the peso, which is down almost 12 percent against the dollar over the last two years. With import growth set to continue outpacing export growth over the next few years, we suspect that the trade deficit will widen further and the peso will remain under pressure,” Capital Economics said.
The peso fell to 12-year low levels partly due to market concerns on the current account deficit as the country spends more dollars to cover its imports.
This month, the Cabinet-level Development Budget Coordination Committee (DBCC) cut to 9 percent the merchandise exports growth target for 2018 from 10 percent previously, while the imports’ goal was also reduced to 10-percent increase from 11 percent.
Pernia, who also heads the state planning agency National Economic and Development Authority, had said that the trade war between top trading nations such as the United States and China “may dampen a bit global economic growth.”
As such, the trade war “could have adverse effect on our exports in the global market,” Pernia had said.
For 2019 to 2022, the DBCC kept its yearly merchandise exports target of 9-percent expansion and imports growth goal of 10 percent. —BEN O. DE VERA