Economists: High import bill from costly oil “worrying”

MANILA, Philippines—Despite robust foreign trade growth in February, the sustained imports increase bloated by expensive oil would not be supportive of a strong economic rebound, economists said on Friday (April 8).

The Philippine Statistics Authority’s (PSA) latest preliminary external trade report showed that two-way trade rose 18.1 percent year-on-year to $15.8 billion last February, a faster growth than 4.6 percent a year ago but slower than the 20.3-percent increase in January. Total trade went up from $13.4 billion in the same month last year, but was lower than January’s $16.8 billion.

Merchandise exports grew 15 percent year-on-year to $6.2 billion, reversing the 1.4-percent contraction during the same month last year.

February’s exports also outpaced the 9-percent rise and the value of shipments to overseas amounting to over $6 billion in January.

In a note to clients, ING senior Philippine economist Nicholas Antonio Mapa mainly attributed the strong exports outturn to the 15.1-percent jump in electronics sales — the Philippines’ top export commodity. “Global demand for components and semiconductors appears to be intact, and we can expect the overall export sector to take its queue from electronics,” Mapa said.

In a separate note, Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco noted that February’s exports growth was a six-month high and benefitted from base effects due to COVID-19 lockdown restrictions that extended up to early last year.

“The signal from South Korea’s trade data remains positive, suggesting that Philippine export growth should remain in the double-digits. Exports of semiconductors continued to power through in February, following an uneventful 2021, hitting an all-time high,” Chanco said.

Meanwhile, goods imports in February climbed 20.1 percent year-on-year to $9.7 billion, a faster increase than 9 percent a year ago but slower than the 27.7-percent rise a month ago. In terms of value, February’s import bill was bigger than 2021’s $8.1 billion but smaller than last January’s $10.8 billion.

“In previous import surge episodes, we had noted that the main driver for sudden spikes in inbound shipments was deemed to be ‘pro-growth.’ The period between 2017 and 2019 showcased a substantially widening of the trade gap, fueled in large part by outsized gains for productive sectors such as capital goods and raw materials imports,” Mapa said.

However, Mapa said that “this time around, the trade deficit appears to be driven mainly by surging fuel imports, while other important leading indicators for potential growth such as capital imports and raw materials have posted only modest gains.”

“More worrying is that outside fuel imports, most other sub-sectors saw slower growth, which does not bode well for the expansion hopes for the Philippine economy,” Mapa added.

The trade-in-goods deficit amounted to $3.5 billion in February, wider than the previous year’s $2.7 billion but narrower than the prior month’s $4.7 billion.

“We’re more than happy to see this mild [month-on-month] deterioration [in the trade deficit], as it reflects a partial comeback in domestic demand from the Omicron-hit month of January, when imports suffered a near-8 percent month-on-month collapse,” Chanco said.

“Part of this plunge was recouped in February, when inbound shipments rose by 2.4 percent — a bounce driven to a large extent by imports of consumer goods and mineral fuels,” Chanco added.

For Mapa, the peso “could get reprieve” from the smaller trade deficit, but the domestic currency was “likely to pull back” as “expensive energy prices are expected to bloat the import bill from current levels” while US dollar demand picks up.

TSB