Imports extend slump to 8th straight month in November

By Mark T. Amoguis, Senior Researcher

LATEST government data showed imports declining for the eighth straight month in November while exports were flat, the Philippine Statistics Authority (PSA) reported on Friday.

Imports fell eight percent year-on-year to $8.94 billion in November, lower than the 10.8% decline seen in October, but reversing from the 9.6% growth seen in November 2018.

The latest reading marked the eighth consecutive month of decline for imports.

To date, the merchandise import bill declined by 4.6% to $99.15 billion from $103.94 billion in 2018’s comparable 11 months. This remained below the two-percent target set by the Development Budget Coordination Committee (DBCC) for 2019.

Meanwhile, the value of merchandise exports edged down 0.7% annually to $5.60 billion in November from $5.64 billion a year ago. This was a turnaround from the revised 0.3% uptick recorded in October and the one-percent growth in November 2018.

Export receipts were down 0.02% to $64.56 billion from $64.58 billion on a cumulative basis against the DBCC’s one-percent target set for the year.

The trade-in-goods deficit figured at $3.34 billion compared to a $4.07-billion trade gap in the same month in 2018. Cumulative, the trade deficit reached $34.59 billion, smaller than the $39.36-billion gap in January-November 2018.

“[I]mports posted yet another month of contraction, mainly due to the drop in energy imports and items related to construction (iron and steel, non-ferrous metals), even as government attempts to jump-start spending to catchup post budget delay,” ING Bank NV Manila Branch Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

Mr. Mapa noted that the “substantial pullback” in imports for the majority of 2019 was due to two things: the budget delay that curbed raw materials for construction and the “meltdown” in investment activity, which is reflected in the “subpar importation” of capital goods and consumer durables.

“In October and November, we saw a good revival of these imports, which bodes well for capital formation…,” Mr. Mapa said.

Imports of raw materials and intermediate goods declined by 14.6% to $3.23 billion in November from $3.78 billion in the same month in 2018. These materials accounted for 36.2% of the country’s total imports in November.

Imports of mineral fuels, lubricant and related materials likewise dropped by 34.9% to $836.51 million from $1.29 billion.

In particular, imports of coke fuel and petroleum crude declined by 44.3% and 40.8% in November, respectively, to $92.44 million (from $166.04 million) and $310.92 million (from $524.92 million).

On the other hand, imports of consumer and capital goods increased by 10.2% and 1.6%, respectively, to $1.73 billion and $3.07 billion.

On the export side, declines were recorded in the sales of petroleum products and agro-based products, which declined by 80.4% and 7.5%, respectively, to $7.22 million and $367.05 million.

Manufactured goods, which accounted for 85.5% of total exports in November, inched up by 0.005% to $4.78 billion.

Electronics, which made up more than two-thirds of manufactured goods and more than half of total exports, grew by 1.4% to $3.28 billion, with semiconductors contributing $2.45 billion, an increase of 2.2% from $2.40 billion a year ago.

Exports of mineral and forest products rose 25.5% and three percent, respectively, to $299.71 million and $23.97 million.

ING’s Mr. Mapa noted the “marginal growth” in the exports of electronic products, which were unable to offset the struggles of the rest of the export sector amidst the ongoing global trade war.

In a statement, the National Economic and Development Authority (NEDA) said the growth in global trade could face a slow recovery amid the increasing tensions between the US and Iran, although the US trade dispute with China appears close to being resolved.

“The heightened conflict between the US and Iran and its impact on oil prices could result in increased cost of production for domestic-oriented as well as export-oriented firms,” Socioeconomic Planning Secretary Ernesto M. Pernia was quoted in the NEDA statement as saying.

NEDA said the country still imports majority of its petroleum supply in the Middle East, particularly Saudi Arabia, the United Arab Emirates, and Kuwait.

“However, looking at the structure and pattern of imports of crude petroleum to the Philippines indicate that the country has diversified its source of crude petroleum in recent years, such that the level of vulnerability to supply shocks has been slightly reduced,” he added.

For this year, ING’s Mr. Mapa said the trade trend is expected to reverse in 2020 with the trade gap seen to widen on account of recovering imports.

“With the budget for 2020 and 2019 operating simultaneously, we could see a resumption for raw materials imports while energy imports will also increase, due mainly to the dollar price of crude,” he said.

“With growth picking up, we can foresee a renewed widening of the trade gap, which would, in turn, exert pressure on the peso to experience a weakening bias in 2020.”

Likewise, Security Bank Corp. Chief Economist Robert Dan J. Roces expected the trade balance to “widen further into deficit” as spending is expected to accelerate “with a double dose of stimulus meant for an accelerated infrastructure program.”