External trade continues slump in June as coronavirus pandemic drags on
THE COUNTRY’S exports and imports continued to plunge, albeit at a slower pace in June, the Philippine Statistics Authority (PSA) reported on Wednesday.
Merchandise exports shrank by 13.3% to $5.33 billion in June after a 26.9% yearly decline in May, preliminary trade data from the PSA showed.
Likewise, merchandise imports fell 24.5% to $6.63 billion in June, slower than the 40.6% plunge recorded in May.
June marked the fourth straight month of decline for exports and 14th straight month of downturn for merchandise imports.
Trade deficit in June was recorded at $1.30 billion, smaller than the $2.64-billion gap in the same month last year.
For the first half, exports were down 17.8% to $28.43 billion, worse than the -4% expected by the Development Budget Coordination Committee (DBCC) this year
Meanwhile, the merchandise import bill dropped 29% to $39.03 billion on a cumulative basis against the DBCC’s target of a 5.5% contraction for the year.
That brought the year-to-date trade balance to a $10.60-billion deficit, smaller than the $20.42-billion shortfall in the same six months last year.
In a statement released by the National Economic and Development Authority (NEDA), the continued decline in merchandise exports can be partly due to “demand factors,” particularly the economic performance of the country’s main trading partners amid the pandemic.
“With restricted mobility and economic activity due to the global pandemic, GDP (gross domestic product) growth is negatively affected. Our major trading partners’ GDP has declined in the second quarter of the year, resulting in a reduced appetite for imported goods. This has led to lower demand for Philippine exports,” Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua was quoted in the NEDA statement as saying.
Export of manufactured goods, which account for around 82.7% of the total exports in June, slipped 13.6% year on year to $4.41 billion from $5.10 billion last year. Total agro-based products were also down 18.1% to $403.51 million in June from $492.50 million previously.
Electronic products, which made up more than half of the total June export sales, contracted by 10.4% to $3.18 billion. Semiconductors, which account for more than three-fourths of electronic products, also slid by 8.1% to $2.44 billion.
On the import side, raw materials and intermediate goods, which account for 42.9% of the imports bill in June, declined by 10.7% to $2.85 billion.
“This slower decline in the country’s trade performance signals the resumption of economic activities,” NEDA’s Mr. Chua said.
Even so, external trade is expected to contribute negatively to economic growth in the second quarter.
“[Second-quarter] GDP performance is expected to be worse than [first-quarter GDP]… mainly due to the pandemic. The decline in merchandise exports is a contributing factor to the decline, which is also caused by the pandemic,” John Paolo R. Rivera, Asian Institute of Management economist and adjunct faculty, said in an e-mail.
“Trade performance for the rest of the year will depend on the decisions taken by the government now to manage and contain the pandemic and chart a rapid and robust economic recovery. A good policy mix from the fiscal sector and monetary authority will influence trade as it should create a favorable trading, business, and investment environment for exporters and importers,” Mr. Rivera added.
The government will release second-quarter GDP data today.
Philippine Exporters Confederation, Inc. President and Chief Executive Officer Sergio R. Ortiz-Luis, Jr. said export performance is expected to return to positive territory towards the end of the year as businesses open up and lockdowns loosen.
“By next year, we think that it will definitely be positive,” he said in a phone interview.
“[These figures] should translate to weaker potential output for the Philippine economy in the coming months,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a note to reporters.
“[We] also expect GDP momentum to be slowed even further as the flow of capital goods, raw materials and consumer goods remains weak with positive GDP growth only expected to return in a base-effect induced rebound in 2021,” Mr. Mapa added.
China was the top market for Philippine goods in July, accounting for 16.7% with $891.58 million. It was followed by Japan with a 15.1% share or $807.05 million, and the United States’ 14.4% share or $768.66 million.
China was also the Philippines’ biggest source of foreign goods purchased in July, accounting for 23.7% at $1.57 billion. Other major import trading partners were Japan and the US, which contributed 8.5% ($567.14 million) and 8.2% ($544.28 million), respectively. — Jobo E. Hernandez
