PH trade deficit swelled to record $4.7B in Nov 2021

The Philippines’ trade deficit swelled to $4.71 billion—the biggest monthly gap on record —in November 2021 mainly as imports soared by over a third, bolstered by renewed consumer demand when more economic sectors reopened.

The latest preliminary Philippine Statistics Authority (PSA) data on Tuesday showed that the value of imported goods, which entered the country in November 2021, jumped 36.8 percent to $10.98 billion, reversing the 13.5-percent drop to $8.03 billion the previous year.

In a research note, ING Philippines senior economist Nicholas Mapa said the ballooning deficit in the trade of goods was expected to keep the Philippine current account balance on a downtrend in 2022 after having pushed this back into negative territory in 2021.

Data from the Bangko Sentral ng Pilipinas (BSP) show that as of January to September last year, the country’s current account—which, aside from the inflow and outflow of goods, also covers the country’s transactions in services and incomes —was pegged at a deficit of $2.6 billion compared with a surplus of $7.8 billion in the same period of 2020.

Economic reopening

“Despite the recent tightening of restrictions implemented to start the year due to the Omicron variant, economic reopening will likely be sustained as authorities look for creative ways to keep the economy up and running during periods of heightened mobility curbs,” Mapa said.

“With the current account expected to remain in deficit territory, pressure on PHP (the Philippine peso) to weaken should persist in 2022 although other factors such as the looming Fed (United States Federal Reserve) rate hike will likely play a major role in the currency’s trajectory this year,” he added.

Mapa attributed the robust imports growth to year-on-year increases in nearly all import sub-sectors while the government dismantled restrictions to enjoin consumption.

The Philippines consumes more imports than it exports.End-November imports climbed 30.4 percent year-on-year to $106.29 billion, exceeding prepandemic levels.

Merchandise exports also grew, but at a slower 6.6 percent year-on-year to $6.27 billion. The increase in sales of Philippine-made products abroad in November was faster than growth rates recorded the previous month and year.

Electronics exports

The exports gain was mainly driven by the 5.6-percent rise in electronic exports— the Philippines’ biggest export commodity accounting for over half of total, Mapa said.

Cumulative 11-month exports rose 15.2 percent year-on-year to $68.37 billion, also higher than prepandemic sales in 2019.

In November alone, total foreign goods trade amounted to $17.25 billion, up 24 percent year-on-year. End-November exports and imports combined totaled $174.67 billion, also up 24 percent from levels in 2020, when the Philippines suffered from its worst postwar, pandemic-induced recession.

The surge in imports widened the trade-in-goods deficit in November by 119.5 percent from $2.14 billion during the same month in 2020.

The end-November trade deficit of $37.92 billion was 71.2-percent bigger than $22.15 billion the previous year.

“Although imports rose across the board, one of the major factors for the stark widening of the trade gap was higher fuel imports. Costlier imported crude oil translated to overall fuel imports rising sharply, which in turn helped bloat the trade deficit to its current record high,” Mapa said.

“With global crude oil prices staying elevated at the start of this year, the Philippines could continue to experience large trade deficits in the near term,” Mapa added. INQ