June trade deficit narrowed further to $4.3B

The country’s trade gap declined to its narrowest in three months as exports saw a double-digit decline due to unfavorable base effects from last year while lower commodity prices dragged the growth in imports.

Preliminary data from the Philippine Statistics Authority (PSA) showed the trade-in-goods balance—the difference between exports and imports —tilting to a $4.3-billion deficit in June, narrowing from the $4.71-billion shortfall recorded in the previous month, but still wider than the $3.94-billion deficit last year.

READ: June trade deficit narrows further to $4.30 billion

This was the narrowest trade gap in three months or since the $3.35-billion deficit in March.

Total sales of local goods declined by 17.3 percent year-on-year to $5.57 billion in June, falling further from 3.1 percent and 0.2 percent contractions recorded in the previous months and July 2023, respectively.

By value, export receipts in June were the lowest in more than a year or since $4.92 billion in April 2023.

Base effects

“In terms of the collapse in exports, it’s worth bearing in mind that base effects were still quite unfavorable for this latest report. Nonetheless, the huge drop reflects in part a marked deterioration in monthly momentum seen throughout the second quarter and, in June specifically, the damage was caused in large part by a big monthly pullback in shipments to developed markets, particularly Japan and the United States,” Pantheon Macroeconomics economist Miguel Chanco said.

“The pullback in demand from both isn’t exactly surprising when considering that Japanese economic growth remains subdued and the cyclical upswing in the United States is starting to turn a corner,” Chanco added.

John Paolo Rivera, senior research fellow at Philippine Institute for Development Studies, said the setback in exports may be due to low production as high local demand is consuming more of the available output, leaving less for exports.

Meanwhile, the country’s merchandise imports fell by 7.5 percent year-on-year to $9.87 billion in June. This was a reversal from the previous month’s 1-percent growth. The contraction, however, was still lower than the 14.8-percent decline in June 2023.

The import bill in June was the lowest level in three months or since the $9.57 billion in March.

Chanco attributed the “weaker-than-expected” import growth due to lower commodity prices. He stressed that the sluggish demand for real imports including capital and consumer goods reflects the broader economic slowdown in the country.

Both capital and consumer goods fell in June, logging in a 8.8 percent decline to $2.82 billion and 7.3 percent to $1.90 billion, respectively. INQ