MANILA, Philippines — The country’s foreign debt is expected to increase further as higher import costs—exacerbated by the weak peso—may offset the growth in export receipts.
“The overall relationship between the peso and the trade deficit is that the depreciating peso is accompanied by a worsening trade deficit. Month-to-month or year-on-year trends may not necessarily follow this, but the overall trend is robust and unsurprising,” Sonny Africa, economist and executive director at think tank Ibon Foundation said in a Viber message on Thursday.
The trade gap further ballooned to $ 4.76 billion in April from the $3.44 billion recorded in the previous month.
In May, the peso weakened to the 58 to a dollar level for the first time in two years.
READ: Peso slides to 58 to $1
Africa noted the depreciation of the local currency would “bloat the country’s and the government’s foreign debt even more” albeit lower US interest rates could ease pressure on the weakening peso.
Data from the Bureau of the Treasury showed outstanding debt grew by 0.61 percent to P15.02 trillion at end-April from P14.93 trillion at end-March. The outstanding debt stock surged by 7.95 percent from P13.91 trillion in the same period last year.
READ: Weaker peso increases gov’t debt burden
As of the first quarter, the government debt’s share in the gross domestic product (GDP) stood at 60.2 percent, lower than 61.1 percent a year ago. This was above the government’s debt-to-GDP ratio target of 55.9 percent by 2028.
Philexport president Sergio Ortiz-Luis Jr., meanwhile, attributed the growth in exports and imports in May to a “surge of orders in the electronic sector.”
Electronic products recorded the highest export value, amounting to $3.57 billion.
“When we import about 60 to 70 percent of raw materials, it is a bit expensive, but if we export it, it washes. We gain benefits on the local added value so it breaks even,” Ortiz-Luis Jr. added.