PH trade deficit swelled to record $4.7 billion in November 2021

MANILA, Philippines—The Philippines’ trade deficit swelled to $4.71 billion — the biggest monthly gap on record — in November 2021 mainly as imports soared by over a third, bolstered by renewed consumer demand when more economic sectors reopened.

The latest Philippine Statistics Authority (PSA) data on Tuesday (Jan. 11) showed that the value of imported goods which entered the country last November jumped 36.8 percent to $10.98 billion, reversing the 13.5-percent drop to $8.03 billion a year ago.

In a report, ING senior Philippines economist Nicholas Mapa attributed the robust import growth to year-on-year increases in nearly all import sub-sectors while the government dismantled restrictions to encourage consumption. The Philippines consumes more imports than it exports.

Mapa said it helped that “the Philippine economy continues to gradually reopen, although new waves of COVID-19 could threaten to delay some of the recent progress.”

End-November imports climbed 30.4 percent year-on-year to $106.29 billion, exceeding pre-pandemic levels.

Merchandise exports also grew, but at a slower 6.6 percent year-on-year to $6.27 billion. The increase in sales of Philippine-made products abroad in November was faster than growth rates a month ago and a year ago.

The exports gain was mainly driven by the 5.6-percent rise in electronic exports — the Philippines’ biggest export commodity accounting for over half of total, Mapa said.

Cumulative 11-month exports rose 15.2 percent year-on-year to $68.37 billion, also higher than pre-pandemic sales in 2019.

In November alone, total foreign goods trade amounted to $17.25 billion, up 24 percent year-on-year. End-November exports and imports combined totaled $174.67 billion, also up 24 percent from levels in 2020, when the Philippines suffered from its worst post-war, pandemic-induced recession.

The surge in imports widened the trade-in-goods deficit in November by 119.5 percent from $2.14 billion during the same month in 2020.

The end-November trade deficit of $37.92 billion was 71.2-percent bigger than $22.15 billion a year ago.

“Although imports rose across the board, one of the major factors for the stark widening of the trade gap was higher fuel imports. Costlier imported crude oil translated to overall fuel imports rising sharply, which in turn helped bloat the trade deficit to its current record high,” Mapa said.

“With global crude oil prices staying elevated at the start of this year, the Philippines could continue to experience large trade deficits in the near term,” Mapa added.

Mapa said that “despite the recent tightening of restrictions implemented to start the year due to the Omicron variant, economic reopening will likely be sustained as the authorities look for creative ways to keep the economy up and running during periods of heightened mobility curbs.”

Mapa said he expects the current deficit to have reverted to negative territory last year and continue the trend this year.

For Mapa, “pressure on the peso to weaken should persist in 2022, although other factors such as the looming Fed rate hikes will likely play a major role in the currency’s trajectory this year.”

TSB