THE Philippines’ trade-in-goods deficit widened year on year in February as imports rose by double-digits while exports eased, the Philippine Statistics Authority (PSA) reported on Friday.
Analysts said that February trade data suggests that recovery remains intact but vulnerable to external shocks due to the rising energy prices from the Middle East conflict.
Preliminary data from the PSA showed that the country’s trade balance — the difference between exports and imports — reached a $3.68-billion deficit in February, 23.1% wider than the $2.99-billion gap posted a year earlier.
Month on month, the trade gap narrowed from the revised $4.27 billion posted in January.
February saw the smallest trade balance in nine months or since the $3.64 billion recorded in May 2025.
Merchandise imports climbed by 12.6% year on year in February 2026. It was faster than the 2.1% expansion a year ago but a turnaround from the 1% drop in January.
The import bill for that month reached $11.01 billion, bigger than the $9.78 billion in February 2025.
On the other hand, total outbound sales of Philippine-made goods went up by 8% year on year in February to $7.33 billion, slower than the 12.8% expansion in February 2025 and 8.7% gain a month earlier.
It was the slowest pace for exports in six months or since the 5.5% growth in August 2025.
For the first two months of the year, the trade-in-goods deficit widened to $7.96 billion, 0.1% higher than the $7.95 billion-gap in the January-February period last year.
Outbound sale of goods expanded by 8.3% to $14.47 billion in the first two months of 2026, while imports rose by 5.3% to $22.43 billion.
The Development Budget Coordination Committee (DBCC) projects 6% and 5% growth in exports and imports, respectively, this year.
IMPORTS REBOUND
Chinabank Research said in a research note that imports rebounded through near-term growth will largely be driven by oil price effects as the demand for capital goods surged even before the Middle East conflict escalated.
It added that surging oil prices will likely push up total imports and widen the trade deficit in the near term.
“However, softer demand due to supply shortages will correct this price-driven import growth by the second half of the year,” it said.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines said that the trade deficit widening is due to the double-digit growth in imports, driven by higher purchases of electronic products, capital goods, fuel, and intermediate inputs.
He added that the imbalance mechanically widened the trade gap even as export earnings improved.
“The faster expansion reflects a combination of firm domestic demand, ongoing capital spending, and higher global prices, particularly for energy and industrial inputs,” he said in an e-mail.
Imports of raw materials and intermediate goods in February fell by 13.7% to $3.22 billion. These accounted for 29.3% of the total February import bill.
In February, imports of capital goods grew by 55.5% to $4.15 billion, while the imports of consumer goods also jumped by 10.4% to $2.14 billion.
Imports of mineral fuels, lubricants and related materials increased by 3.8% year on year to $1.46 billion.
China was the top source of imports, accounting for 28.4% of the total or $3.12 billion of the total import bill in February. It was followed by South Korea with an 12.5% share or $1.37 billion and Japan with 8.5% or $933.36 million.
EXPORT GROWTH EASE
“On the export side, growth continued to be supported by the electronics sector, which remains the country’s largest export contributor, alongside gains in machinery and gold,” Mr. Asuncion said.
He added that the modest growth on exports is due to base effects “as February 2025 already posted double‑digit expansion, and lingering softness in global demand in selected non‑electronics products.”
For Chinabank Research, even with the 8% decent growth, the conflict in the Middle East could disrupt supply chains.
“Exports face headwinds from supply chain disruptions and a potential slowdown in global economic activity. This could temper earlier gains from lower-than-expected US tariffs,” it said.
Electronic products, which made up almost three-fourths of manufactured goods and more than half of total exports in February, grew by 20.5% to $4.23 billion.
With 43.7% share from semiconductors of the total exports, it jumped by 26.9% to $3.20 billion.
Exports of mineral products also expanded by 52.7% to $615.26 million in February, while petroleum products declined by 34.5% to $16.54 million.
The United States was the main destination of Philippine-made goods in February, accounting for 19.3% or $1.41 billion in export sales. Other top export destinations were Hong Kong, which accounted for 16% or $1.17 billion and Japan, which accounted for 13.5% or $986.44 million.
Chinabank Research added that exports to the US—the country’s largest export market—surged by 42.9%. The 10% global US tariff currently in place, lower than the reciprocal tariffs that were struck down by the US Supreme Court, could help improve US demand.
“Still, market diversification was evident as US trade policy remains highly uncertain. Shipments to East Asia rose by 14.2% and the EU by 9.5%,” it said.
MIDDLE EAST CONFLICT
Chinabank also said that the conflict in the Middle East poses a significant risk to the country’s trade performance this year.
For Mr. Asuncion, if these geopolitical tensions in the Middle East persists, the most immediate transmission channel would be through higher global oil prices, which could raise the peso value of fuel and transport‑related imports.
“This may again put upward pressure on import values and the trade deficit in the near term. Higher fuel costs could also push up production and logistics expenses, with possible spillovers to export costs and margins.”
He added that the March trade performance will depend not only on oil prices but also on global electronics demand, exchange rate movements, supply chain conditions, and seasonal trade patterns.
Additionally, any easing in shipping disruptions or currency support from remittance and portfolio inflows could partly cushion the impact on external trade.
“In the coming months we could see imports rise further for mineral fuels with crude oil prices surging. Other energy costs will also likely increase. We could also see imports of capital goods and raw materials take a back seat as investor sentiment takes a hit,” Nicholas Antonio T. Mapa, chief economist and markets strategist at Metropolitan Bank & Trust Co., said in an e-mail.
He added that one development that is being monitored is the import of materials used in electronics exports.
“It is now negative which suggests that companies are no longer importing factors of production for our mainstay electronics. Thus, we could eventually see exports face challenges in the coming months.”
GOVERNMENT EFFORTS
Even if geopolitical risks remain elevated, the country can still work toward the DBCC’s export and import growth targets through a mix of policy support and structural measures, said Mr. Asuncion.
“On the export side, improving trade facilitation, easing logistics bottlenecks, and accelerating investments in manufacturing, electronics, and high‑value agro‑exports will be crucial. On the import side, continued emphasis on productive imports, particularly capital goods that expand supply capacity, will help support sustainable growth rather than widen vulnerabilities,” Mr. Asuncion added.
“From a policy perspective, government efforts that would help ease the impact of prolonged external shocks include energy diversification, targeted fuel support during price spikes, strengthening local supply chains, and maintaining macroeconomic stability,” he said.
Mr. Asuncion also said that Monetary and fiscal coordination will also be important to keep inflation expectations anchored while supporting growth and external competitiveness. — Lourdes O. Pilar
