H1 trade deficit widens to $29.79B

The country’s trade deficit widened to $29.79 billion at the end of the first half of the year from $17.95 billion last year, according to the Philippine Statistics Authority, with the gap hitting another monthly high in June.

National Statistician Dennis Mapa on Tuesday confirmed that the June trade deficit amounting to $5.84 billion was the biggest monthly gap on record. Last June, imports climbed 26 percent year-on-year to $12.49 billion, while exports growth slowed to just 1 percent as sales of Philippine-made goods overseas reached $6.64 billion.

The country’s chief economist, however, is not worried about the yawning trade deficit, as long as the growth in imports supported domestic investments and infrastructure. President Marcos’ economic managers had projected 18-percent merchandise imports growth exceeding a 7-percent increase in exports this year.

The wide trade gap had resulted in a current account deficit as the country had to shell out more dollars to pay for expensive commodity imports, especially oil and food products, as Russia’s invasion of Ukraine dragged on. In turn, the current account deficit was weakening the peso, which hit 17-year lows recently.

Despite the depreciation pressures on the domestic currency wrought by the robust imports growth outpacing exports, Socioeconomic Planning Secretary Arsenio Balisacan said in a briefing that the medium- to long-term impact of importation of capital goods and raw materials would augur well for sustaining economic growth.

Balisacan, who heads the state planning agency National Economic and Development Authority (Neda), expects the Philippines’ trade deficit to further balloon as well as linger for longer, especially as exports expansion usually lagged while imports were being bloated by high global prices.

The Neda chief said the construction sector, infrastructure development and capital formation stood to benefit from a surge in imports.

“The expectation is these investments that we are putting in place [like] the improvement in transport and connectivity, and better tower facilities will improve the competitiveness of our industries, particularly our exports. And we will get the dividends from these investments,” Balisacan said.

Balisacan added that he was not worried about the trade gap’s impact spilling over to the peso as the country has many other sources of foreign exchange earnings such as the cash remittances being sent home by Filipinos working and living overseas, tourism receipts from inbound tourists, as well as foreign direct investments seen to increase following liberalization of many sectors under amendments to three antiquated economic laws which had been enacted by the previous Duterte administration. —Ben O. de Vera INQ