By Janina C. Lim
THE CONTINUING surge of merchandise imports and a drop in products sold abroad pushed the country’s trade in goods deficit further towards the $4-billion mark in September, the Philippine Statistics Authority (PSA) said on Wednesday on the eve of its third-quarter gross domestic product (GDP) report.
Foreign sales of Philippine goods that month declined 2.6% to $5.83 billion from $5.99 billion in September 2017. The drop capped three straight months of increases. Year to date, merchandise exports were down 2.08% to $50.755 billion against the government’s two-percent full-year growth target for 2018..
Merchandise imports in September surged 26.1% to $9.75 billion from the adjusted $7.74 billion in the same month last year, taking year-to-date total to $80.665 billion, 16.271% up year-on-year against a nine percent official growth target for 2018.
September flows yielded a $3.93-billion trade deficit that was more than double the year-ago $1.75-billion gap, marking the sixth straight month the deficit hovered past the $3 billion mark.
Year-to-date trade deficit widened by 70.492% to $29.91 billion from the $17.543 billion recorded in last year’s comparable nine months.
Philippine trade year-on-year performance (September, 2018)
Electronics as a category was both the country’s biggest merchandise exports and imports.
This group, which accounted for 58.6% of total exported goods in September, saw outbound sales grow 4.17% annually to $3.414 billion that month and by 5.743%to $28.46 billion year-to-date.
September also saw electronic products account for 24.935% of total inbound goods at $2.432 billion, 29.48% from a year ago. This item grew 20.532% to $20,818 billion year-to-date.
ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa noted that the September trade gap is the “widest in recorded history” and “worse than expected,” notwithstanding weakness of the peso which averaged P53.94 against the greenback September. “Exports continue to underperform, posting a two percent contraction YTD after the -2.6% in September. In turn, the weaker currency may have contributed to imported inflation as now more expensive import costs are passed on to the consumer,” Mr. Mapa said in a note on Wednesday.
The National Economic and Development Authority (NEDA) attributed imports’ surge to growing purchases of capital goods which accounted for 30.2% or $2.95 billion of the import bill in September, sustaining a double-digit increase for six straight months. The segment went up 25.4% from $2.35 billion from the same month last year. Year-to-date, imported capital goods went up to $26.24 billion from $22.55 billion. “The growth in import of capital goods could indicate that firms are making long-term investments,” NEDA quoted its director-general, Socioeconomic Planning Secretary Ernesto M. Pernia, as saying in a statement on Wednesday.
Continued strong acquisition of capital goods and raw materials will drive overall imports “to remain elevated until 2019,” Mr. Pernia said.
NEDA attributed exports’ drop to “weak global growth”, saying: “Downward adjustments in economic growth forecasts signal that global growth may have already peaked. Global growth is seen to remain on the positive but to decelerate and be uneven across countries.”
September saw sales of manufactured goods account for 85% of exports at $4.95 billion, slipping 1.9% from $5.05 billion a year ago.
Outbound shipments for mineral products slid 30.8% to $263.27 million from $380.39 million in the same comparative months.
Rizal Commercial Banking Corp. Economist Michael L. Ricafort expects merchandise trade deficit to breach the $4 billion mark within the year amid government’s aggressive infrastructure spending as well as an anticipated boost in foreign direct investments. “There is a chance for trade deficit to post a new monthly record high beyond $4 billion if the government’s infrastructure spending, especially on mega infrastructure projects (Build Build Build) continues to accelerate in the coming months and if the growth in real estate and construction continues to sustain, leading to higher imports of steel/metals and other construction-/real estate-related inputs,” Mr. Ricafort said in an e-mail, noting that September marked the second straight month that imports posted a record high.
“Continued growth in FDIs could also lead to wider trade deficits due to the need to import more capital equipment and other imported inputs needed to complete production facilities.”
For ING Bank’s Mr. Mapa, “the current account will likely remain in deficit with the Philippine peso looking to structural flows such as remittances ahead of the holiday season and the capital and financial account for support.”