The Philippines’ total foreign trade fell at its fastest pace in April amid a global recession worsened by the first full month of one of the most stringent COVID-19 lockdowns in the region which had led to the paralysis of 75 percent of the country’s economy.
The latest initial external trade data released by the Philippine Statistics Authority (PSA) on Wednesday (June 10) showed merchandise exports dropped 50.8 percent to $2.8 billion last April from $5.6 billion in 2019.
The PSA attributed the decline in sales of Philippine-made goods abroad to year-on-year drops in shipments of seven major export commodities:
- Other manufactured goods (down 64 percent)
- Machinery and transport equipment (down 63.6 percent)
- Coconut oil (down 55.5 percent)
- Electronics (down 48.6 percent)
- Other mineral products (down 46.7 percent)
- Fresh bananas (down 28 percent)
- Gold (down 9.5 percent)
Imports in April fell 65.3 percent to $3.3 billion from $9.5 billion in 2019.
The fall in import volumes in April, the PSA said, was due to declines in the entry of the top 10 major import commodities. Among these were:
- Transport equipment (down 89.8 percent)
- Mineral fuels, lubricants and related materials (down 87.4 percent)
- Miscellaneous manufactured articles (down 75.5 percent)
National Statistician Claire Dennis S. Mapa said the collapse of export and import volumes in April exceeded records—40.6 percent decline in January 2009 and 37.1 percent decline in April 2009, which were caused by a global financial crisis that year.
Two-way external trade—exports and imports—last April was down by 59.8 percent to $6.1 billion from $15.1 billion in 2019.
Mapa said the drop in total foreign trade that month was also the biggest on record.
As the value of imports still exceeded that of exports, the balance of trade-in-goods remained at a deficit of $499.2 million in April, but 86.9-percent narrower than $3.8 billion in 2019.
The narrowing trade deficit augured well for the Philippine peso, Bank of the Philippine Islands (BPI) lead economist Emilio S. Neri Jr. noted.
“No wonder the peso outperformed in April,” Neri said.
“Import compression had offset the impact of capital flight and weaker prospects for overseas Filipinos’ remittances,” he said.
“That the peso continues to outperform through June may be a sign that imports and overall demand collapse is still happening until today,” Neri said on Twitter.
For ING Bank Philippines senior economist Nicholas Antonio T. Mapa, “the drop in imports is mirrored in the fall in corporate demand for the dollar during the lockdown period with the peso managing to remain steady throughout the same month with peso spot trading nearly half of the norm.”
In a note to clients, Mapa said the government has tagged the Build, Build, Build (BBB) infrastructure program as a means to revive the economy.
“We expect import growth to return in the coming months,” said Mapa.
“Inbound shipments for construction materials, fuel and capital machinery used for construction will likely bloat the import bill at a time where export prospects look bleak given projected recessions in major trading partners like the US, Japan and China,” he said.
“The widening of the trade gap coupled with the absence of usual dollar inflows from remittances could translate to a swelling of the current-account deficit which could spark renewed depreciation pressure on the Philippine peso in the second half,” Mapa said.
For 2020, the Cabinet-level Development Budget Coordination Committee (DBCC) had projected goods exports to decline 4 percent, and imports to drop 5.5 percent.
Exports and imports of goods were expected to bounce back in 2021 and grow by 5 percent and 8 percent.