The volume of Philippine exports and imports grew in January amid a landmark agreement between the US and China though economists see rough times ahead for trade due to the COVID-19 outbreak.
Latest initial data from the Philippine Statistics Authority (PSA) on Tuesday (March 10) showed that merchandise export volume rose 9.7 percent to $5.8 billion last January. The value of imports inched up 1 percent to $9.3 billion.
Volume of total external trade increased by 4.1 percent year-on-year to $15.1 billion, even as the trade deficit narrowed by a tenth to $3.5 billion due to the surge in exports.
“The narrowing trade deficit may be another reason why the peso has managed to outpace regional peers, now under pressure on COVID-19 concerns,” said ING senior economist Nicholas Antonio T. Mapa in a report.
In January, the US was the top export destination of Philippine-made goods, while China remained the biggest source of imports.
Robert Dan J. Roces, Security Bank chief economist, said export numbers, though, “have not captured COVID-19 impact yet.”
The growth in export volume was “likely residual effects from December levels” and results of orders related to the initial deal between the US and China which were “mostly fulfilled by the electronics” industry, he said.
Outbound shipments of electronic products—the Philippines’ largest export commodity—jumped 15.8 percent to $3.2 billion in January.
Roces said, however, that a contraction in electronic exports was likely in the coming months “as the global supply chain is impaired” by declining demand due to the coronavirus pandemic.
Mapa agreed, saying a slowdown in electronics export “will likely drag the entire export sector in 2020.”
The Cabinet-level Development Budget Coordination Committee (DBCC) had projected exports growth at 4 percent this year.
Roces said imports were also likely to be hurt as “manufacturing and logistics concerns” still hound China and could lead to a “negative economic feedback loop.”
Roces warned of the impact on the Philippine government’s infrastructure projects of a contraction in imports.
Mapa said this was mainly because the Philippines imports its iron and steel needs from China.
Last week, economic managers expressed confidence that the flagship infrastructure projects to be rolled out under the ambitious “Build, Build, Build” program would not face delays as construction materials and equipment had been well-stocked ahead of the COVID-19 outbreak that put a halt to many manufacturing facilities in China.
Imports were expected to increase by 8 percent in 2020.
For external trade as a whole, Mapa said “we can expect both exports and imports to face weakness.”