Exports return to negative territory; imports continue free fall

Exports reverted to negative territory in October while imports sustained double-digit decline for the ninth straight month, which economists said reflected the Philippines’ slow economic recovery from the pandemic-induced recession.

The latest preliminary Philippine Statistics Authority (PSA) data on Thursday showed October merchandise exports shrank by 2.2 percent year-on-year to $6.2 billion, reversing the 2.9-percent growth posted in September.

Imports fell by a faster 19.5 percent year-on-year to $7.98 billion compared to the 15.3-percent drop in the previous month.

Two-way external trade in October declined 12.8 percent year-on-year to $14.18 billion, a bigger contraction than September’s 8.2 percent.

Due to the imports slump, the trade-in-goods deficit further narrowed to $1.77 billion from $1.78 billion a month ago and $3.57 billion a year ago.

In a note to clients, ING Philippines senior economist Nicholas Antonio Mapa explained that “exports remained weak on subdued global demand while imports sustained a free fall, down for a notable 18 straight months with the economy in recession.”

“Fast-fading domestic demand coupled with negative investment sentiment forced imports to fall at a double-digit rate for the ninth consecutive month, with capital goods, a leading indicator of productive capacity, falling by 19.1 percent. With inbound shipments of capital machinery fading fast, we forecast a slow and arduous recovery for the Philippine economy given the likely hit on potential output,” Mapa said.

“A substantial drop-off in consumer goods (negative 21.8 percent) reflects hobbled domestic demand conditions, with the Philippines recording a third quarter of negative growth,” Mapa added, referring to the 10-percent average contraction in gross domestic product (GDP) in the first nine months.

For Mapa, “the current trends of anemic exports and free-falling imports [would] continue into early 2021 with a lackluster global growth and domestic demand to start the year.”

“Despite early optimism derived from vaccine development, we believe vaccine deployment will not be instantaneous, especially in the Philippines with authorities yet to secure a single dose of the vaccine. The absence of vaccines and a projected slow rollout (three to five years per official government estimates) will weigh on domestic economic activity and curtail any potential recovery in investment appetite. Thus we expect import demand to recover but at a very shallow trajectory—leading to a very gradual and slow recovery for the Philippines as it operates with diminished productive capacity,” Mapa said.

Acting Socioeconomic Planning Secretary Karl Kendrick Chua said in a statement that he still found positive developments from October’s trade data.

Chua noted that “merchandise exports to our leading regional trading partners such as China and Asean both grew in double digits.”

“Also, capital goods imports increased in October compared to September, suggesting that business activities have been responding to the government’s approach for a targeted and gradual reopening and increased mobility,” added Chua, who heads the state planning agency National Economic and Development Authority.

Chua nonetheless reiterated the need to further open up the economy in a gradual and safe manner to speed up not only trade but also overall economic rebound. INQ