MANILA, Philippines – Global and domestic supply chain disruptions caused by the COVID-19 pandemic, which limited movement not only of people but also of goods, inflicted a sharp drop in the Philippines’ exports and imports in March, the government reported on Wednesday.
Preliminary Philippine Statistics Authority (PSA) data showed that sales of Philippine-made products abroad slid 24.9 percent year-on-year to $4.531 billion, while imported goods fell by a faster 26.2 percent to $6.911 billion last March.
Since the dip in imports outpaced the exports decline, the trade-in-goods deficit narrowed by 28.6 percent to $2.38 billion that month.
“The sharp contraction in March trade data reflects the early onset of COVID-19, primarily in its effect on the country’s major trade partner—China. The Philippines, being a part of the global supply chain, saw an abrupt pullback in export demand orders as China, Japan and South Korea were battling the virus. Imports for March dropped, mirroring the negative performance of government construction efforts as raw materials were unable to arrive on time as supply chains were disrupted,” ING Bank Philippines senior economist Nicholas Antonio T. Mapa said in a note to clients.
“Meanwhile, the March 15 lockdown cut off the Philippines with the rest of the world, with port congestion noted immediately after the implementation of the quarantine as details on logistics had yet to be put in place. We expect months of sustained contraction in the immediate term as lockdown stymies manufacturing and business activity. Subdued global demand should ensure trade in 2020 will be disappointing,” Mapa added.
Total external trade in March contracted by 25.7 percent year-on-year to $11.442 billion, which the state planning agency National Economic and Development Authority (Neda) said was the lowest monthly value of exports and imports combined in two years.
In a statement, Neda blamed “the COVID-19 pandemic around the world and the resulting restrictions in production supply chains and global trade flow” for the Philippines’ weak external goods trade in March.
At the end of the first quarter, Philippine exports declined 5.2 percent year-on-year to $15.72 billion while imports fell 13.6 percent to $23.261 billion, bringing total three-month foreign trade down by 10.4 percent to $38.981 billion.
The first-quarter trade deficit nonetheless narrowed by 27.1 percent to $7.541 billion.
Last March, the Cabinet-level Development Budget Coordination Committee (DBCC) via ad referendum reduced the growth projections for merchandise exports to 0.5 percent, and for goods imports to 3 percent, from 4 percent and 8 percent, respectively.
Budget Undersecretary Laura B. Pascua had told the Inquirer that the revised but preliminary exports growth target for this year “was due to both the reduction of global growth as well as the high dependence of our exports on China.”
As for the less rosy imports outlook, Pascua had attributed it to “the reduction of the projected 2020 gross domestic product (GDP) growth from 6-7 percent to a worst-case of negative 1 percent to zero, and lower global oil prices.”
For Acting Socioeconomic Planning Secretary and Neda chief Karl Kendrick T. Chua, “merchandise trade may recover in 2021, but this will depend on how fast we can contain the spread of COVID-19 and mitigate its economic impact through government policies to support affected industries and workers.”
“To improve the country’s trade performance, export manufacturers are encouraged to use digital technology and innovative approaches to continue operation and secure new markets. Firms will have to put in place alternative business processes that will become the new standards for engaging with clients, buyers, and suppliers,” Chua said.
“The export industry needs to be more responsive to the changes in consumer spending and redesign their product lines accordingly. Firms need to consider the needs and preferences of those working from home such as in terms of garments, personal care, health equipment, and household tools. We may see increased interest in advanced electronics and software for artificial intelligence, plastic products that serve as a barrier for storefronts, and other protective equipment,” Chua added.