End-Sept external goods trade up 25.1% to $140.5B

External merchandise trade climbed 25.1 percent year-on-year to $140.5 billion as of end-September, boosted by a 30.3-percent jump in the value of imports, including expensive oil, as demand rose amid economic reopening.

The latest preliminary Philippine Statistics Authority (PSA) data on Friday showed that goods exports and imports combined during the first nine months grew by a fourth from $112.3 billion a year ago.

Since June, two-way foreign trade has already exceeded prepandemic levels.

End-September imports rose to $84.9 billion from $65.1 billion last year. Exports increased 18 percent to $55.7 billion from a year ago’s $47.2 billion.

“The strong recovery in imports will support both consumption and investment in the third quarter. Exports would have been stronger if not for the global logistics constraint,” Socioeconomic Planning Secretary Karl Kendrick Chua told the Inquirer.

The government’s report on the third-quarter economic performance will be out next week.

Since imports value and growth exceeded those of exports, the end-September trade-in-goods deficit widened to 62.6 percent to $29.2 billion.

In September alone, the trade deficit widened by a faster 76.3 percent year-on-year to $3.9 billion, as imports grew 24.8 percent to $10.7 billion.

Exports in September also grew but by only 6.3 percent year-on-year to $6.7 billion, bringing total trade up by 16.9 percent to $17.4 billion.

In a report, the PSA said electronics remained the Philippines’ top export commodity in September, with $3.8 billion worth or more than half of the month’s shipments.

“Exports were led by the robust performance of electronics as demand for components remained healthy amid the global chip shortage. Meanwhile, agro-based exports contracted likely due to crop damage suffered during inclement weather during the month,” ING Philippines senior economist Nicholas Mapa said in a research note.

Electronic products and parts, which were being assembled in the country, were also the top import commodity in September with $2.8 billion, followed by mineral fuels, lubricants and related materials amounting to $1.4 billion.

“Import growth has been on a tear in 2021, due in large part to the low base from the extremely low import volumes last year. Imports in level terms have jumped to match and surpass pre-COVID-19 levels, suggesting that economic activity is on the mend. Imports have indeed rebounded as the economy gradually hums back to life; however, a big reason for the surge in inbound shipments can be traced to international developments and to a lesser extent due to the rebound in the economy,” Mapa said.

“Fuel imports have recently easily topped $1 billion but the stark increase in dollar value can be explained more by the 100-percent increase in crude oil prices. This development has caused the fuel import bill to bloat by as much as $650 million with the actual volume of fuel imported right at about the average for September. Raw materials, on the other hand, have seen a strong pickup in construction materials such as iron and steel; however, a good portion of the 30.1-percent rise in raw materials imports was delivered by the 24.2-percent growth of raw materials used for electronics exports,” he added.

For Mapa, “the protracted run of outsized trade deficits will likely sap momentum from the overall GDP [gross domestic product] numbers in the near term.”

“Unlike the recent capital formation boom from 2016 to 2018, surging imports for the 2021 episode are bloated partly by expensive oil and to some extent supported by the robust demand for our electronics. Meanwhile, other areas of the import portfolio such as capital goods and consumer imports have posted slowing growth, suggesting that the rebound in economic activity still has some space to accelerate. The wider trade deficit and more importantly the movement of its components suggest that GDP momentum has improved but remains subdued and will need some time before a full recovery is made,” Mapa said.

The economic team belonging to the Development Budget Coordination Committee (DBCC) targets 10-percent growth in goods exports and a faster 12-percent increase in imports this year to reverse last year’s 15.1-percent drop in total foreign merchandise trade.