Exports, imports still in a slump in January

Trade of goods to and from the country fell 11.1 percent to $13.4 billion in January from $15.08 billion a year ago as both exports and imports contracted—a sign of slow economic recovery at the start of the year.

The Philippine Statistics Authority’s (PSA) latest preliminary report released on Friday showed total trade on January shrank at a faster pace than December 2020’s 4.2 percent year-on-year while reversing the 1.5-percent growth posted a year ago.

Merchandise exports declined 5.2 percent year-on-year to $5.49 billion, a reversal of the 1.7-percent and 9.4-percent growth posted a month and a year ago, respectively.

The PSA said the major export commodities that suffered the sharpest drops were fresh bananas (down 46.9 percent year-on-year), other manufactured goods (down 12.8 percent), machinery and transport equipment (down 11.9 percent) and coconut oil (down 11.7 percent). On the bright side, electronic products—the Philippines’ top shipment abroad—grew 0.3 percent year-on-year.

“The poor showing of exports related to food manufactures is tied to recent storm damage that hurt crop production and weighed on fourth-quarter 2020 GDP (gross domestic product),” ING Philippines senior economist Nicholas Mapa said in a report.

Imports continued to decline year-on-year for the 21st straight month as products from overseas slid 14.9 percent to $7.91 billion in January.

‘Sustained drop’

Out of the top 10 Philippine imports, only cereals and cereal preparations managed to grow by 9.5 percent while sectors such as industrial machinery, transport equipment, mineral fuels and lubricants, miscellaneous manufactured articles, iron and steel as well other food and live animals saw importations decline by double-digits last January.

“The sustained drop in imports highlights the negative impact of the recession with a 14.8-percent drop in capital goods mirroring falling capital formation while the 12.9-percent contraction in consumer goods reflects fast-fading household consumption,” Mapa said.

Growth pains

For Mapa, the ongoing slump in imports suggested that growth pains for the Philippines would be around for some time with the sustained drop in capital goods and raw materials suggesting that potential output is falling as well. GDP is expected to continue its year-on-year contraction for the fifth consecutive quarter during the January-to-March 2021 period as prolonged COVID-19 quarantine hampered business and consumer confidence.

“Heavy machinery for construction, commercial aircraft and road vehicles have all fallen sharply, which will dent capital formation and cap any recovery effort for an economy still struggling with recession,” Mapa added.

The faster slide in imports nonetheless narrowed the trade-in-goods deficit to $2.42 billion in January from $3.5 billion a year ago, which Mapa said augured well for the peso.

“Weak imports have translated to soft corporate demand for the US dollar, which has been one of the key factors behind the Philippine peso’s resilience over the past few months. With the trade deficit now hovering at roughly $2 billion a month (compared to $3.3 billion prior to COVID-19), we can expect soft corporate demand for the dollar to help support the peso in the near term,” Mapa said.

Alongside its outlook of 6.5-7.5 percent GDP growth in 2021 as the economy emerges from pandemic restrictions and rebounds from last year’s record 9.5-percent recession, the economic team targets a 5-percent growth in goods exports and 8-percent increase in imports this year.