Exports down, imports up in February

MANILA, Philippines — Merchandise exports declined for the third straight month while imports posted growth for two consecutive months in February, further widening the trade-in-goods deficit to $6.708 billion at the end of the first two months.

Preliminary Philippine Statistics Authority (PSA) data released Thursday showed that sales of Philippine-made goods overseas fell 3.9 percent year-on-year to $10.456 billion as of February, even as the value of imported products that entered the country in the first two months rose 3.1 percent to $17.165 billion.

As such, the balance of trade in goods remained at a deficit at end-February, 16.4 percent bigger than the $5.763-billion deficit posted a year ago.

In February alone, exports declined 0.9 percent year-on-year to $5.177 billion, even as it was the slowest drop since December last year.

While shipments of fresh bananas, cathodes, manufactured articles, electronic products, and chemical increased last February, exports of metal components, gold, machinery and transport equipment, other manufactured goods, and ignition wiring sets used in vehicles, aircraft, and ships recorded decline.

The United States, Japan, China, Hong Kong, Singapore, Thailand, Germany, South Korea, the Netherlands, and Taiwan were the top 10 destinations of Philippine exports that month.

Meanwhile, imports grew 2.6 percent to $7.966 billion in February, accounting for three-fifths of total trade that month, due to the influx of transport equipment, cereals, mineral fuels and lubricants, food and live animals, and telecommunication equipment and electrical machinery sourced from abroad.

One-fifth of the imported products last February came from China, followed by Japan, South Korea, Thailand, US, Indonesia, Singapore, Malaysia, Taiwan, and Vietnam – the country’s top 10 sources of imports.

While total two-way trade inched up 1.2 percent to $13.143 billion in February from $12.988 billion a year ago, the deficit widened by 9.9 percent to $2.788 billion from $2.537 billion last year.

For ING Bank Manila senior economist Nicholas Antonio T. Mapa, the yawning trade gap in favor of imports was a manifestation of “slowing” economic growth.

“Imports continue to grow, albeit at a more subdued pace in 2019 compared to previous years. The fuel import bill has increased but the slowdown in shipments of raw materials and deceleration in capital goods imports reflects slowing growth momentum and should be a cause of concern,” Mapa said in a report.

“Elevated borrowing after the Bangko Sentral ng Pilipinas’ aggressive 175-basis point rate hike salvo [in 2018] may be hampering capital expansion while the budget delay, which put government projects on hold, has led to the contraction importation of construction materials.”

“Consumer import growth, outside road vehicles, shows that household spending will likely regain prominence in 2019 now that inflation is firmly within target and falling,” Mapa also said.

Further, Mapa noted: “On the export side, outbound shipments remain heavily dependent on the electronics trade which has managed to post only meager growth prints while the rest of the sector has struggled.”

“The ongoing trade war [between the US and China] means that the Philippine export sector will need to continue to build on sector-changing reforms to help boost productivity, by enhancing supply chains and increasing standards while hoping that a weaker currency can buy them some time to stay afloat until the true export renaissance.”

“Until then, our fundamental view of trade deficits will continue to exert a depreciation bias on the Philippine peso but with the slowdown in capital goods and raw material imports, trade deficits may not be as pronounced and current account gaps will likely improve in the coming months,” he added.