PH two-way trade showing signs of life, says Pantheon

MANILA, Philippines — Better days may be ahead for the Philippines’ external trade as exports looked to break months of slow downtrend while imports finally showed signs of life, London-based Pantheon Macroeconomics said.

In a commentary sent to journalists, Miguel Chanco, chief Emerging Asia economist at Pantheon, said the big trade deficit recorded in April was a welcome development after figures showed a “solid bounce-back in two-way trade.”

Data from the Philippine Statistics Authority (PSA) showed the country’s balance of trade—or the difference between the value of exports and imports—tilted to a deficit of $4.76 billion, the largest in five months but was smaller by 1.5 percent compared with a year ago.

READ: April trade deficit widens to $4.76 billion — PSA

That the country continued to post a trade deficit means it spent more on imports than earned from export sales during the month. As it is, a large trade gap could put pressure on the peso, which had been trading at 19-month lows in recent weeks, although Pantheon’s Chanco said it was OK to “swallow” the wide trade shortfall in April.

“We’ll swallow the Philippines’ big April deficit, as imports showed signs of life,” Chanco said, adding that the big trade deficit during the month was “amplified” by “very favorable base effects.”

Dissecting the PSA’s report, exports grew by 26.4 percent year-on-year in April to $6.2 billion after sales of electronic products, the country’s top export, went up by 33.3 percent to $3.6 billion.

Break from downtrend

Based on Pantheon’s month-on-month adjustment, outbound shipments rebounded to a seven-month high of 2.3 percent and were “looking to break from the gradual downtrend that has been in place since September last year.”

“Demand from Hong Kong is picking up rapidly, while shipments to the US continue to regain upward momentum steadily, offsetting the sluggishness in exports to China, which continued at the start of the second quarter,” Chanco said.

READ: Big reduction in PH trade gap unlikely in 2024, says ANZ

Meanwhile, imports—a gauge of domestic demand conditions—grew at an annualized rate of 12.6 percent to $10.98 billion, the best expansion in 19 months. For Pantheon, such a development could signal a rebound in economic activity, adding that inbound shipments of major goods would have to show a more convincing uptrend in the coming months.

”Nonetheless, the April [imports] rise was broad-based and fairly robust across the board. It will take more than a single month of good data, however, to stop imports of consumer goods from rolling over further,” Chanco said.

“Fortunately, purchases of capital goods continue to find their feet, though they have a lot of catching up to do,” he added.