Importation grew in February to end 21 months of free fall

MANILA, Philippines—Imports eked out a 2.7-percent year-on-year growth in February to end 21 straight months of decline, but private sector economists on Thursday (April 8) said year-to-date shipments did not show a return to strong domestic demand yet.

Preliminary Philippine Statistics Authority (PSA) data showed the value of imported goods last February rose to $7.6 billion from $7.4 billion a year ago.

The year-on-year declines in monthly imports started in May 2019 and dragged on as the Philippines slid into its worst post-war recession last year.

The PSA also on Thursday said its revised estimates showed that gross domestic product (GDP) fell 9.6 percent in 2020, a bigger drop than the 9.5 percent announced by the government in January.

Last year, imports slid 19.5 percent to $89.8 billion while merchandise exports dropped 8.1 percent to $65.2 billion. Total external trade shrank 15.1 percent to $155 billion in 2020.

For 2021, the government expects goods imports to grow 8 percent alongside a 5-percent increase in exports as GDP was seen reverting to 6.5-7.5 percent growth.

But PSA data showed exports stayed in negative territory for the second straight month in February, although with a smaller contraction of 2.3 percent to $5.3 billion from $5.4 billion last year.

Total two-way trade inched up 0.6 percent year-on-year to $12.9 billion last February, but the trade-in-goods deficit widened 16.5 percent to $2.3 billion as a result of the bigger imports.

Acting Socioeconomic Planning Secretary Karl Kendrick Chua said the return to import growth and narrower exports decline were “signs of recovery overall,” and that he was hopeful for sustained better foreign trade performance for the rest of the year.

Miguel Chanco, Pantheon Macroeconomics senior Asia economist, nonetheless noted that the value of imports in February was smaller than January’s $8.4 billion—“the headline year-on-year rate returned to the black for the first time in nearly two years purely on the back of base effects.”

“Nevertheless, we find some bright spots in the details, notably the hefty 12.2-percent rebound in capital goods imports, following their 3.2-percent fall in the previous month. This was more than enough to keep their recovery from last year’s lockdown broadly intact,” Chanco said.

“On the other hand, though, imports of consumer goods continued to struggle, and they look set for a renewed collapse, due to the headwinds posed by the second virus wave. All told, the weakness in domestic demand will continue to dominate,” Chanco added.

Nicholas Mapa, ING senior economist for the Philippines, said “inbound shipments of goods and services will continue to expand in the coming months, benefiting from a favorable base and with manufacturers replenishing depleted inventories.”

“But although we’ve seen growth in raw materials and capital goods, overall investment activity in the Philippines remains soft with corporates and households postponing expansion activities until the economic outlook improves,” Mapa said.

“Meanwhile, exports may face some challenges in the near term with global trade expected to take a hit after select countries reinstate lockdowns to deal with spiking COVID-19 cases in their areas,” Mapa added.

TSB