Philippine February trade deficit eased as exports surged by 16%

MANILA — The Philippines’ external trade deficit shrank in February as a robust export growth outpaced a modest uptick in imports that reversed two straight months of contraction.

The country posted a trade gap of $3.64 billion in February, down by 6 percent compared with a year ago, the Philippine Statistics Authority reported on Thursday. The shortfall was also smaller than the $4.39-billion deficit in January.

The trade deficit means the country continued to spend more on imports than earn from export sales.

But the narrower gap, which may ease some pressure on the peso, is nevertheless seen to be a welcome development. This year, the Marcos administration projects merchandise exports to grow by 3 percent and imports to expand by 4 percent.

Data showed exports had amounted to $5.91 billion in February, up by 15.7 percent. Electronics, which comprised more than half of total outbound shipments, jumped by 26.8 percent.

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

“The surge in electronics shipments is in line with a similar recovery enjoyed by regional trading partners, with demand for basic chipsets likely tracking the gains for higher value-added electronics,” said Nicholas Mapa, senior economist at ING Bank Manila.

Import bill up 6.3%

The import bill, meanwhile, rose 6.3 percent to $9.56 billion, snapping two consecutive months of decline. Broken down, almost all subcategories posted growth, led by inbound shipments of raw materials, which fattened by 11.8 percent. Only capital goods, which sagged by 3.4 percent, posted a contraction.

For Mapa, the anemic imports of capital goods could be a symptom of “subdued potential output” in the next months.

“The decline in inbound shipments for capital goods tracks the subdued pace of expansion for the economy’s capital formation, with investment outlays likely constrained by elevated borrowing costs,” he said.

READ: PH hopes to grow export revenues by at least 10% in 2024

Moving forward, Mapa said the strong export gains should help support overall first-quarter economic performance, although the trade deficit could stay “substantial” in the near term.

“The surprise jump in exports would mean less pressure on the currency, which will be key in the near term given the recent pullback by Asian currencies due to evolving expectations for the [Federal Reserve] pivot,” he said.

“We expect the trade deficit to remain substantial in the coming months as imports rise, which, alongside souring sentiment, could translate to renewed pressure on the [peso], with the central bank likely active in smoothing out volatility in the spot market,” he added.

The cumulative two-month trade deficit stood at $8.04 billion, down 14.8 percent year-on-year. Export receipts climbed 12.2 percent to $11.84 billion, while imports slipped 0.5 percent to $19.88 billion.