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By Mark T. Amoguis, Researcher

Merchandise imports rise for fifth straight month

Posted on December 30, 2015

INBOUND SHIPMENT of goods opened the third quarter on a strong note, fueled by a double-digit increase in the Philippines’ purchases of raw materials and intermediate products.

Preliminary data the Philippine Statistics Authority (PSA) released on Tuesday showed that the country brought in $6.53 billion worth of goods last October, 16.8% more than the $5.59 billion imported in 2014’s comparable month that also bared a smaller 15.4% annual increase.

This was the fifth consecutive month of growth since June, with the October increase faster than the upwardly revised 8.2% September increment.

PSA attributed the October rise in imports to increases in six out of the country’s 10 top imports, namely: electronic products; industrial machinery and equipment; telecommunication equipment and electrical machinery; iron and steel; cereals and cereal preparations; and transport equipment.

Economic Planning Secretary Arsenio M. Balisacan said October’s import growth “is a healthy indication of robust investment demand,” citing the predominance of intermediate and capital goods.

Raw material and intermediate goods accounted for 42.8% of total imports, and rose by 40.1% to $2.79 billion last October from $1.99 billion in 2014’s comparable month.

“The rise in intermediate goods reflects the restocking activity of the manufacturers in the country although exports may be in for some headwinds given depressed global demand,” said Nicholas Antonio T. Mapa, economist at the Bank of the Philippine Islands (BPI).

“We may see this remain unsold and reflect in our change in inventories going forward.”

Donald G. Dee, Philippine Chamber of Commerce and Industry (PCCI) honorary chairman and chief operating officer, agreed that the October imports growth highlights “replenishment... restocking of inventories.”

Remrick E. Patagan, research director at the Institute for Development and Econometric Analysis, Inc. (IDEA), said the October data are “in line with seasonally strong demand in anticipation of the holiday season towards the end of the year; thus, the growth in all major commodity types.”

Gundy Cahyadi, DBS Bank economist, said: “The strong import growth of intermediate goods is consistent with the fact that exports of electronic products are still growing at a decent 8% annual pace.”

Raw materials and intermediate goods include electronic products, which accounted for 32.2% of the October import bill and surged by 70.7% to $2.10 billion from $1.23 billion last year.

Of this year’s electronics imports, components or semiconductors comprised 24.4% and grew by 85.4% to $1.59 billion from $858.66 million in October of last year.

“The robust jump in capital goods imports is also indicative of sustained strength in domestic investment,” Mr. Cahyadi said.

Capital goods, which made up 32.3% of the October import bill, rose by 25.4% to $2.11 billion from $1.68 billion last year.

“Increasing appetite for capital goods and manufactured goods, such as materials accounting for the manufacture of electrical equipment, signifies an upbeat business sector,” said Mr. Balisacan, who heads the National Economic and Development Authority as director-general.

“This demonstrates the overall business confidence growth of 51.3% recorded in the fourth quarter this year from 41.4% in the previous quarter, as reported by the Bangko Sentral ng Pilipinas. This is the highest we had in the last two years,” Mr. Balisacan said, referring to the quarterly Business Expectations Survey conducted by the central bank, with the latest round released early this month.

“The anticipated recovery of the global economy and brisk election spending will continue to drive imports to double-digit growth,” he added.

BPI’s Mr. Mapa agreed, saying: “We can expect increased imports for the rest of the year as purchases of capital goods as well as durable goods will offset the decline in the mineral sector of the import bill.”

Mineral fuels, lubricants and related materials, which comprised 8% of the October import bill, slumped by 38.5% year on year to $524.81 million.

Year to date, overall imports reached $56.53 billion, 3.9% higher than the $54.39 billion in the same 10 months of last year. The government has targeted a 1% growth in imports for this year.

With exports down by 6.2% to $48.87 billion in the first 10 months, the country posted a $7.66-billion deficit in its balance of trade in goods for the same period.

Mr. Mapa said the latest trade data indicate that the “trade deficit widened further, so this will be a drag on 4Q GDP.”

IDEA’s Mr. Patagan agreed, saying that a higher trade deficit in October meant that net exports won’t contribute much to overall gross domestic product (GDP) growth.

While it is early to say if this will be sustained for the remaining months of the year, Mr. Patagan said: “If exports pick up relative to imports and the trade deficit improves in November and December, the impact on Q4 GDP may be muted all in all.”

Merchandise exports, which rely heavily on imported components, had historically accounted for a third to 40% of GDP.

The government is eyeing GDP growth of 7%-8% for 2015, but Mr. Balisacan as early as August had conceded that full-year expansion could settle between 6%-6.5%.

In order to meet a full-year expansion of 6%, the economy would have to grow by 6.9% this quarter.

PSA is scheduled to release 2015 fourth-quarter and full-year growth data on Jan. 28 next year.