Dip in electronics demand pulled down Dec. imports

Philippine imports contracted by 6.5 percent year on year in December as declining shipments of electronic products pulled down overall trade, according to government figures.

As a result, the trade deficit in December reached $1.22 billion. This brought the 2011 full-year trade gap to $12.097 billion. Both were higher than the corresponding figures reported the previous year, data from the statistics agency showed.

Socioeconomic Planning Secretary Cayetano W. Paderanga Jr. said the contraction was not surprising given sluggish global economic conditions.

Trade may start to recover this year and may help drive growth, in terms of gross domestic product, to a “conservative” 5 percent from the 3.7 percent reported in 2011, Paderanga said on the sidelines of the Asian Development Bank-Agence Française de Développement-Japan International Cooperation Agency forum.

The sharp drop in electronics shipments highlighted weak demand for the country’s main semiconductor exports, raising doubts that the country could hit its 5-6 percent growth target this year.

Also, the deteriorating trade numbers bolstered calls for another rate cut later this week to support growth.

Eugene Leow, an economist with DBS of Singapore, noted that it was the first time in 26 months that headline import growth turned negative.

“The trade dynamics has been skewed to the downside by weak electronics demand, but import has overall been more robust, indicating a more resilient domestic economy,” Leow said. “With signs of bottoming out in electronics exports in several Asian countries, a recovery could be imminent for the Philippines, and this should also prompt a rebound in electronics imports.”

He added that an easing bias for the Bangko Sentral ng Pilipinas would likely persist “until clearer signs of a rebound in the global recovery are seen.”

Electronics, which made up 27.3 percent of the aggregate import bill, dropped by 25.9 percent to $1.265 billion in December 2011 from $1.706 billion of the previous year.

Also, semiconductors fell by 37 percent to $892.77 million from $1.418 billion in 2010.

Aggregate payment for the country’s top 10 imports for December 2011 reached $3.497 billion, or 75.6 percent of the total import bill.—With a report from Reuters