Remittances, exports seen to slow down

THE PHILIPPINES has a weaker outlook for the third quarter due to an expected slowdown in exports and remittances from overseas Filipinos, according to a unit of the Organization for Economic Cooperation and Development.

The OECD Development Center said in a research note that the pessimistic outlook was based on the anticipated fallout from the triple disasters in Japan and the long drawn tension in the Middle East and North Africa where many Filipinos are based.

“A policy challenge in the region is to cope with inflationary pressures,” the center said in its latest Asian Business Indicators paper. “Although headline inflation has peaked in most Southeast Asian countries (except Vietnam), inflationary pressures still remain … as core inflation rates are high in Southeast Asia.”

The OECD unit believes that the Great Touhoku Earthquake in Japan has had a temporary impact on activity and exports in some countries, including the Philippines.

“But in general, the magnitude of the negative impact appears to have so far been limited,” it said.

In a separate research issued in May, UBS Securities said large inventories meant for export were behind the gaping Philippine trade deficit seen in the first quarter.

The Switzerland-based investment research firm said the domestic economy had nothing to do with the rise in imports—as seen in the temporary increase in inventories. Rather, regional and global economies collectively accounted for this trade development.

Data from the National Statistics Office showed that the country posted a trade deficit of $3.368 billion in the first quarter—more than double the $1.441 billion recorded in the same period of 2010.

“We find surprisingly little evidence of excess in the Philippine economy,” said UBS economist Edward Teather. “Instead the wider trade balance is largely a function of a sharp jump in intermediate goods—imports—which implies a rise in inventories rather than booming consumption.”

Teather said that a UBS forecast of a “soft patch” in global growth, based partly on higher inventories, had something to do with the country’s huge deficit.

Teather said UBS expected China—which, along with Hong Kong, takes up a fifth of Philippines exports—to see an inventory-related economic slowdown. Ronnel W. Domingo