October trade gap biggest on record as imports outpace exports in growth
By Ranier Olson R. Reusora
Researcher
FOREIGN SALES of Philippine goods grew for the 11th straight month last October, but the double-digit increase in merchandise imports drove the monthly trade gap to its biggest on record, the government reported yesterday.
Preliminary data which the Philippine Statistics Authority (PSA) released on Tuesday showed export sales growing 6.6% to $5.37 billion in October, up from September’s 4.9%, but slower than the 9.7% increase recorded in October 2016.
The October data brought year-to-date export receipts to $53.11 billion, an 11.7% increase from the $47.554 billion recorded in 2016’s comparable 10 months.
The year-to-date pace is way above the government’s five percent growth target for the year.
On the other hand, imports increased by 13.1% to $8.21 billion in October from the year-ago $7.26 billion. It was also faster than September’s 4.4% growth.
On a cumulative basis, imports amounted to $75.06 billion year to date, up 8.3% from the $69.3 billion in 2016’s comparable 10 months, below the government’s 10% growth target for the year.
Consequently, the country’s trade deficit increased to $2.845 billion in October, wider than the gaps of $2.08 billion in September and $2.22 billion in October 2016.
October’s trade deficit is the worst monthly gap on record, surpassing the previous peak of $2.74 billion recorded last May.
Analysts, however, pointed out that this is not necessarily a bad thing.
“If you’d look at the historical trade balance data, this year is one of the widest and, on the economic expansion side, one of the strongest,” said Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines.
“Thus, a widening of the trade balance at this point in time, is not a concern,” he stressed.
“It just tells you that the economy is working and much is coming into the economy supporting production and economic activity.”
For Angelo B. Taningco, economist at Security Bank Corp., “the widening in the trade deficit during October would weigh on fourth-quarter GDP (gross domestic product) growth, which could result in a lower rate compared with the third quarter.”
“However, I still think GDP growth for the last quarter will likely stay within the 6-7% range.”
Total trade — the sum of exports and imports — increased by 10.4% to $13.578 billion for the month, faster than September’s 4.6% growth, but slightly slower than the 10.5% increase recorded in October 2016.
“We are encouraged by the performance of Philippine trade in recent months, especially with the consistent positive performance of exports,” Socioeconomic Planning Secretary Ernesto M. Pernia was quoted in a statement by the National Economic and Development Authority (NEDA) as saying.
“Cooperation and trade initiatives are integral to sustaining these gains.”
By category, Philippine manufactured goods, which made up 81.9% of the total exports in October, grew 2.9% to $4.39 billion.
Under this category, electronic products — which accounted for 53.2% of the country’s total export earnings — increased by 13.8% to $2.86 billion in October from $2.51 billion in last year’s comparable month.
Outbound shipments of the other major types increased as well, with forest products, petroleum products, mineral products and total agro-based products growing 872%, 179.1%, 51.5% and 0.6%, respectively.
“Exports, in general, are robust and would end the year strong,” said Union Bank’s Mr. Asuncion.
Sergio R. Ortiz-Luis, Jr., president of Philippine Exporters Confederation, Inc. (Philexport), attributed the country’s export growth during the period to the improvement of external demand, citing increasing sales to China as well as the recovery seen in European markets.
On the import side, inbound shipments of raw materials and intermediate goods — which made up the bulk of total import payments at 39.1% — increased 22.2% to $3.21 billion from last year’s $2.630 billion.
The imports of mineral fuels, lubricant and related materials were also up, recording a 15.9% increase, followed by consumer goods (14.8%) and capital goods (2.6%).
The increase in imports, Philexport’s Mr. Ortiz-Luis said, is “an indication that exporters are preparing for the year-end shipments, which will slow down in the early part of next year.”
“I expect the trade deficit to persist in the last two months of the year,” Security Bank’s Mr. Taningco said.
Union Bank’s Mr. Asuncion concurred, saying “[h]owever, the crucial indicator is the strength or the weakness of the peso…”
“At this point, I expect the peso to weaken into 2018, thus, encouraging exports because local products are more competitive, with imports coming in feeding production and industrial activities,” he said.
For his part, NEDA’s Mr. Pernia said: “For 2018, we are looking at improved performance in exports of agricultural products and semiconductors, which continue to comprise a huge portion of Philippine exports.”
He added that Philippine export performance “will likely remain in the positive territory” and should pick up due to higher demand brought by the holiday season.
