THE COUNTRY’s merchandise trade deficit lingered above the $3-billion mark for the fifth straight month this year in August as a pickup in export growth that month failed to offset a slower increase in imports, according to data the Philippine Statistics Authority (PSA) reported on Wednesday.
August saw overseas sales of Philippine goods increase by 3.089% year-on-year to $6.163 billion, outstripped by an 11.034% hike in value of inbound foreign goods to $9.677 billion, yielding a $3.513-billion deficit in trade in goods that was 28.393% bigger than the year-ago $2.737 billion. August’s trade gap was also 0.9% less than July’s $3.546 billion.
Year-to-date, exports dipped 2.049% to $44.908 billion while imports grew 15.043% to $70.911 billion, pushing the merchandise trade gap up 64.668% to $26.003 billion. The government has targeted exports to grow nine percent and imports 10% for 2018.
Philippine trade year-on-year performance (August 2018)
Merchandise export growth in August was the best performance for this year, so far, and was the third straight month of positive performance, while that of imports was the slowest in five months.
In a statement, the National Economic and Development Authority (NEDA) noted that exports in August were buoyed particularly by electronic products, mineral products, as well as fruits and vegetables. It said steps to help exports grow further include removing unnecessary regulatory impediments, raising productivity and competitiveness of businesses, upgrading export quality and standards, improving access to trade finance, and enhancing innovation.
Electronic products, which accounted for 54.282% of exports in August, grew 6.978% year-on-year to $3.346 billion. Year-to-date, this segment was up 5.712% to $24.987 billion.
NEDA also noted that import growth softened on weaker increases in purchases of consumer items, capital goods, as well as raw materials and intermediate goods. It added that the country’s total import bill can be expected to grow further in the coming months on increased purchases of capital goods for the government’s infrastructure development push as well as rising oil prices.
Electronic products, used as intermediate production inputs, made up 25.404% of August merchandise imports at $2.458 billion, up 9.95% from a year ago. Year-to-date, these products grew 19.219% to $18.352 billion.
Capital goods made up 34.466% of imports in August at $3.335 billion, up 12.944% from a year ago. Year-to-date, this segment was up 16.076% to $23.443 billion.
The peso, which on Wednesday was 8.5% weaker against the dollar year-to-date, has also been a factor, supposedly helping to make Philippine goods cheaper when sold abroad while at the same time making it more expensive to buy foreign products.
The eight months to August saw the United States lead overseas markets of Philippine goods with a 15.297% share with $6.869 billion, up by 6.781%. Hong Kong followed with a 14.612% share of $6.562 billion, up 15.196%; Japan came next with a 14.146% share of $6,353 billion, though down by 16.509%; while China accounted for 12.921% with $5,803 billion, up 12.031%.
The same period saw China top sources of products that went into the Philippines, accounting for 19.421% with $13.771 billion, up 24.774%. South Korea came next with a 10.138% share of $7,189 billion, up 38.204; Japan followed with a 9.932% share of $7.043 billion, down 4.181%; while the United States accounted for 7.296% at $5.174 billion, up 5.49%.
The growing trade deficit has fueled the increase in the country’s current account gap, which at $3.1 billion last semester had already hit the full-year projection of the Bangko Sentral ng Pilipinas (BSP). The current account provides a snapshot of the country’s overall economic interaction with the rest of the world covering trade in goods and services; remittances from overseas Filipino workers; profit from Philippine investments abroad; interest payments to foreign creditors; as well as gifts, grants and donations to and from abroad. The growing current account gap has been blamed for the peso’s persistent weakness against the dollar.
ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a note on Wednesday: “The prognosis is for the current account to remain in the red, exerting further pressure on the local unit despite BSP’s already very hawkish stance,” referring to a cumulative 150-basis-point hike in policy interest rates since May as the central bank sought to temper inflation pressures and support the peso.
Sought for comment, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail that the country’s trade gap can be expected to grow further in “this kind of external environment of weak demand for exports.”
“By end 2018, I still expect the trade deficit to further widen and persist,” Mr. Asuncion said.
“Nevertheless, the said trade deficit is not major concern since there are ample international reserves and the macroeconomic fundamentals are fairly stable.” — Janina C. Lim