By Melissa Luz T. Lopez,
IMPORTS likely contracted for the third straight month, with the decline expected to be sustained for the rest of the year, analysts at DBS Bank said, noting that the import performance strengthens the case for an interest rate hike from the Bangko Sentral ng Pilipinas (BSP).
“Market consensus expects another negative print for import growth, ahead of the August trade data this week. We reckon that import growth may remain in the negative, on a year-on-year basis, until the yearend,” the global bank said in a market report.
DBS economists estimate merchandise imports slipped 4.9% in August, which if realized would pose a larger drop than July’s 3.2%.
“The high base effects from last year play a part, but at the same time, the weaker peso would have also been a factor,” the bank analysts said.
The Philippine Statistics Authority will report August trade data today.
The value of imports in July fell to $6.931 billion from $7.159 billion a year earlier. Analysts attributed the decline to the depreciation of the peso, which made foreign goods more expensive.
In the first seven months, imports grew by 7.9% to $51.232 billion, posting a slower climb than the 13.8% rise in goods exports. The government is projecting a 10% increase in imports this year, factoring in the need for more raw materials as more infrastructure projects enter the construction phase.
DBS analysts said the weaker imports could add to inflation pressure, which may prod the BSP to consider raising interest rates in the months ahead.
They particularly referred to the faster-than-expected inflation rate in September which hit 3.4%, matching the peak hit back in April.
“Interesting to see if this may trigger a policy response from the central bank,” the Singapore lender said. “Ultimately, the BSP must play a tricky balancing role — dealing with risks that the economy may overheat without dampening near-term growth by too much.”
“Going by how the central bank has been guiding market rates higher, we reckon that a rate hike is still forthcoming,” it added, noting that the BSP is “overdue” in raising rates.
The Monetary Board decided to keep the benchmark borrowing rate at 3% during its Sept. 22 review, marking the third year the central bank has maintained its policy stance amid manageable inflation and upbeat domestic economic activity.
Central bank officials have said that they do not have to move in sync with the Fed, even after two rate hikes during the first half of 2017 and another 25-basis-point increase expected by December.