The Philippines’ trade deficit hit its widest at $5.93 billion in July amid rising prices of imported petroleum products and food items and slowing exports, adding pressure to the depreciation of the peso that accelerated over the past week.
The trade deficit continued to surge albeit slower in July at 69 percent year-on-year from 76 in June. Still, this was faster than the deficit growth of 64 percent in July 2021.
“The annual growth in the value of imported goods in July 2022 was mainly due to the increases in the values of nine of the top 10 major commodity groups with mineral fuels, lubricants and related materials having the fastest annual growth rate of 86.5 percent,” National Statistician Dennis Mapa said in a statement.
“This was followed by cereals and cereal preparations, which rose by 64.7 percent annually; and transport equipment by 46.6 percent,” Mapa said.
The Philippine Statistics Authority on Friday reported that last July, two-way traffic was valued at $18.35 billion. Of this amount, imported goods accounted for about two-thirds (66 percent). The country spent $2 on imports for every dollar earned from exports.
Imports rose by 21.5 percent to $12.14 billion, slowing down from 26 percent in June and 27.5 percent in July last year.
Meanwhile, export receipts decreased for the first time in 15 months, by 4 percent to $6.2 billion following a 1-percent growth in June and a 14-percent jump in July 2021.
Of the top 10 major exports, four recorded declines, including cathodes and sections of cathodes, of refined copper (-39.9 percent); metal components (-11.3 percent), other mineral products (-9.7 percent), and electronic products (-7.9 percent).
The July readout brought the year-to-date or January-to-July trade deficit to $35.75 billion, which was 67-percent wider than the $21.46 billion recorded in the same period of 2021.
The seven-month trade deficit has already exceeded the full-year 2021 figure of $24.6 billion by almost half or 45.3 percent.
Nicholas Mapa, senior Philippines economist at ING Bank, noted that exports in July were weighed down by fading demand for electronics, one of the biggest dollar earners for the Philippines.
“The rise in imports is more linked to expensive fuel and commodities,” ING’s Mapa said. “Considering this, the Philippine peso is likely pressured to weaken further.”
The peso had seen a shedding streak over the past week, falling to new all-time weakest levels in five consecutive trading days.
The local currency also depreciated during six consecutive trading days up to Sept.8 , during which time it lost a total of P1.035 to the US dollar.
“The record trade deficit may have fundamentally contributed to the weaker peso to new records recently,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corp.