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ANZ sees marginal export recovery in May, not enough to bridge trade gap

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OUTBOUND SALES of Philippine goods likely recovered in May but were not enough to stop the trade gap from growing further, analysts at ANZ Research said.

In its weekly report, the global bank said merchandise exports may have grown by 0.4% in May.

The Philippine Statistics Authority is scheduled to report official trade data today.

“Export growth could have turned marginally positive in May after falling for four straight months in April. Imports on the other hand are expected to have been solid, driven by higher oil prices and the government’s infrastructure programme that is boosting capital goods imports,” ANZ said.

ANZ sees imports surging by 13.9% in May from a year ago.

Factory output is also seen upbeat, with the Nikkei Purchasing Managers’ Index separately showing continued expansion fueled by stronger domestic demand, which the bank said would offset the impact of “tepid” global demand.

“As a result, the trade deficit is expected to have increased to $3.7 billion in May from $3.6 billion in April,” ANZ added.

Merchandise exports fell by 8.46% annually to $5.115 billion in April, compared to the year-ago 22.2% increase, resulting in a 6.2% year-to-date drop to $20.955 billion in value of such shipments. That, in turn, pulled the four-month trade balance to a $12.2-billion deficit, 59.3% bigger than the $7.656-billion gap posted during the comparable year-ago period.

The government expects a wider trade gap this year as it sees imports growing by a tenth to outpace a nine percent expansion in outbound shipments of goods, according to latest projections of the Development Budget Coordination Committee.

In its third-quarter economic report, ANZ also noted that the external trade gap will likely widen further, further pressuring the current account deficit to grow and, ultimately, the peso to weaken more.

“With growth expected to remain high at 6.8% in 2018, macro imbalances are likely to intensify in the Philippines,” ANZ said.

“The current account will likely draw some support from steady remittances inflows and receipts from business outsourcing and tourism sectors. However, this is unlikely to offset the deterioration in the trade deficit.”

The BSP foresees the current account — which measures fund flows in goods and services trading — to balloon to a $3.1-billion deficit this 2018 from last year’s $2.518-billion gap. The current account settled at $208-million deficit in the first quarter, smaller than the $860-million gap in 2017’s same three months.

Economists have blamed the persistent current account deficit for the peso’s prolonged weakness at around P53 per dollar currently.

The central bank has said a “modest” deficit is typical for a rapidly growing economy, with increased imports of capital equipment projected to support economic growth. — Melissa Luz T. Lopez