Big reduction in PH trade gap unlikely in 2024, says ANZ

MANILA, Philippines — A significant decline in the Philippines’ trade deficit is unlikely this year despite the “tentative” recovery in exports, as the government works to meet the infrastructure and food needs of the country, according to ANZ Research.

“Going forward, firm private consumption, government’s infrastructure spending and existing food supply issues in the domestic economy will provide a floor to imports,” ANZ economists Debalika Sarkar and Sanjay Mathur said in a commentary emailed to journalists.

“In combination with a tentative recovery in exports, we do not expect a material reduction in the trade deficit this year,” they added.

Latest government data showed the country’s merchandise trade gap amounted to $4.22 billion in January, 24.7 percent less than the $5.56-billion deficit recorded a year ago. However, the shortfall was larger than the $4.18-billion deficit posted a month earlier, in December 2023.

READ: PH trade gap narrowed year-on-year in January

That the Philippines still posted a trade deficit—albeit milder—means the country continued to shell out more dollars to pay for the import requirements of its developing economy than to earn from the sale of its export products. A worsening of the trade imbalance could put pressure on the peso.

 Export recovery ‘tentative’

PSA data show that export sales jumped 9.1 percent year-on-year to $5.94 billion in January, reversing the 0.5 percent contraction in the previous month. That growth also ended four consecutive months of contraction.

Also, receipts from the sale of electronic products, the country’s top export commodity, amounted to $3.45 billion in January, up by 16.17 percent year-on-year.

But the ANZ economists were not impressed with the exports rebound, which they attributed to favorable base effects. They also noted that both the value of the overall exports and sales of electronic products has been flattish in the past three months on average.

READ: Trade deficit shrank to four-month low in Dec 2023

”This lack of improvement in level data diminishes our confidence in the real strength of the export recovery,” Sarkar and Mathur said.

”It also attests to the weakening relationship between the Philippines’ semiconductor exports and the global technology cycle,” they added.

Zooming out, ANZ Research said expectations of a slight improvement in the country’s foreign trade imbalance would likely keep the current account deficit—which counts both trade in merchandise and services like BPO earnings, cash remittances and tourism receipts—to 3 percent of gross domestic product this year. INQ