Exports inch up, but imports still down in October

MANILA, Philippines — Merchandise exports slightly recovered while imports continued to decline year-on-year for the seventh straight month in October, allowing the peso to strengthen.

The latest preliminary Philippine Statistics Authority (PSA) data Tuesday showed that sales of Philippine-made goods abroad inched up 0.1 percent year-on-year to $6.3 billion last October, reversing the decline posted in September.

In a statement, the state planning agency National Economic and Development Authority (Neda) attributed October’s higher exports to “uptick in earnings from agro-based products, mainly fruits, and vegetables, and manufactured articles.”

However, the value of imported goods that came into the country dropped 10.8 percent year-on-year to $9.6 billion in October – the fastest pace recorded during the seven consecutive months of contraction.

Neda blamed “reduced orders for raw materials and intermediate goods, capital goods, mineral fuels, and consumer goods” for the continuous drop in imports.

For ING Bank Manila senior economist Nicholas Antonio T. Mapa, “the sustained pullback in capital machinery and raw materials imports reflects a worrisome trend with potential productive capacity likely curtailed by previous policy tightening and the 2019 budget delay.”

Total two-way trade declined 6.7 percent year-on-year to $15.9 billion last October, even as the trade-in-goods deficit narrowed by over a fourth to $3.3 billion from $4.4 billion a year ago.

Compared with September, total trade inched up from $15 billion, Neda noted.

“The modest [month-on-month] recovery in the country’s trade figures for October backs the expectations that the export sector will remain relatively steady despite the global slowdown associated with the US-China trade war. This also aligns well with the country’s overall GDP [gross domestic product] growth target of 6-7 percent for 2019,” Socioeconomic Planning Secretary and Neda chief Ernesto M. Pernia said.

Moving forward, Pernia said “possible downside risks, particularly the lingering vulnerabilities and spillovers associated with the trade tensions, need to be managed.”

Mapa nonetheless pointed out that the weak imports that narrowed the trade and current-account deficits, in turn, allowed the peso to gain strength.

“The 11-percent narrowing of the year-to-date trade deficit has helped provide some support for the peso for most of the year. In the short term, the peso will continue to enjoy an appreciation bias on holiday remittance flows and the narrowing trade gap,” Mapa said.

“However, increased demand for foreign currency coupled with a projected easing from the Bangko Sentral ng Pilipinas (BSP) in February 2020 will likely see an end to the recent strengthening bias for the Philippine peso as early as the first quarter of 2020,” Mapa added.

Security Bank chief economist Robert Dan J. Roces was hopeful of recovery in both exports and imports as the Christmas season approached.

“We see exports growing by 1-2 percent and imports probably turning to near positive territory in the last two months of 2019 on the back of seasonal stockpiling for the holiday season and the start of the new year. For 2020, we see import growth improving due to a government expenditure program powered by a spending stimulus; and exports to recover on a bounce back from a partial trade war agreement, if at all,” Roces said.