By Lourdes O. Pilar, Researcher

THE PHILIPPINES’ trade deficit widened to a two-month high of $3.68 billion in November, as export growth slowed while imports declined for the first time in nearly two years, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary data from the PSA showed the value of merchandise imports slipped by 1.9% to $10.78 billion in November, a reversal of the revised 7.7% growth in October and the 36.8% rise in November 2021.

Imports dropped for the first time since January 2021 when it saw an 11.8% contraction. The November import bill was also the lowest in nine months or since the $10.19 billion posted in February last year.

Meanwhile, exports jumped by 13.2% year on year to $7.10 billion in November, slower than the revised 20.3% growth in October but faster than 6.6% in November 2021.

The November reading marked the third straight month of year-on-year growth in exports after the 1.7% contraction in August 2022.

Export earnings that month were also the lowest in three months or since $6.43 billion in August 2022.

This brought the trade-in-goods deficit — the difference between exports and imports — to $3.68 billion in November, narrower than the $4.71-billion shortfall in the same month in 2021.

The November trade gap was wider than the revised $3.31-billion gap in October, and the widest deficit in two months after the revised $4.83-billion gap in September.

November’s total trade — the sum of exports and imports — grew by 3.6% to $17.88 billion, slower than the 12.5% in October and the revised 24.1% in November 2021.

In the 11 months to November, exports grew by 7% year on year to $73.17 billion. This growth rate is still above the revised 4% growth target set by the Development Budget Coordination Committee (DBCC).

Year to date, imports climbed by 20.3% to $126.86 billion, matching the government’s 20% growth target for 2022.

This brought the trade deficit to $53.69 billion in the January-to-November period, widening from the $37.11-billion gap in 2021.

WEAK DEMAND
University of Asia and the Pacific Senior Economist Cid L. Terosa said in an e-mail that the wider trade gap reflected weaker world markets and global demand.

“The slowdown in exports shows weaker global demand for intermediate inputs for manufactured products. Meanwhile, the slowdown in imports reflects a cautious stance towards expanding domestic production given unstable and uncertain external economic conditions,” Mr. Terosa said.

With the latest data, Mr. Terosa expects the recently revised DBCC growth targets for exports and imports in 2022 would be achieved.

“Exports will grow by 5%-6%, while imports will grow by at least 20%,” he added.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail that the November trade data showed strong export growth, lifted by electronics shipments which gained by 22.9% year on year.

“Electronics exports managed to gain sharply despite projections of slowing global demand. Imports, on the other hand, fell into contraction for the first time in 21 months after global energy prices moderated from their highs in 2022. Meanwhile, imports of both capital goods and raw materials fell, suggesting that investment momentum may be slowing in response to rapid fire rate hikes carried out by the central bank last year,” he said.

Despite the improvement, Mr. Mapa noted the trade deficit will keep the current account in deficit territory. The widening of the current account deficit was one of the main factors for the peso’s struggles last year.

“With the trade deficit expected to remain, we believe that the peso’s appreciation may be capped to some extent. The Philippine peso may enjoy some appreciation momentum in the near term on the improving balance of trade, however, a potential quick drop in exports later in the year due to softer global demand for electronics could spell some renewed depreciation pressure on the currency,” Mr. Mapa said.

Data from the Bangko Sentral ng Pilipinas showed the Philippine peso averaged P57.65 to a US dollar in November, a bit stronger than P58.82 monthly average in October. However, this was weaker than the P50.34-to-a-dollar average in November 2021.

Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said the exports performance in November can be attributed to the economy’s continued reopening.

Mr. Ortiz-Luis in a phone interview said that exports will continue to expand, but the 2022 import growth target is unlikely to be achieved.

Manufactured goods, which comprised the bulk of the country’s total export receipts, rose by 15.3% year on year to $6.05 billion in November.

Electronic products, which made up of more than three-fourths of manufactured goods and 64.3% of total exports in November, grew by 22.9% to $4.57 billion. More than two-thirds of electronic product sales came from semiconductors, which surged by 42.4% to $3.74 billion.

Meanwhile, orders of raw materials and intermediate goods fell by 4.6% to $4.06 billion in November. These accounted for more than one-third of the total November import bill.

In November, imports of capital and consumer goods were valued at $3 billion (down 10.4%) and $1.97 billion (up 11.4%), respectively. Mineral fuels, lubricants and related materials grew by 7.9% to $1.68 billion during the month from $1.55 billion last year.

Hong Kong was the top destination of locally made products, accounting for 16.3% ($1.16 billion) of the total receipts. It was followed by United States (16% share or $1.14 billion), and Japan (13.2% share or $938.30 million).

Meanwhile, Mr. Terosa said the trade performance in December 2022, which will be released on Jan. 26, is expected to mirror the weakness in global markets.

“Despite the reopening of China, global markets continue to be cautious about the prospects of spectacular rebound in economic activities in China. Soaring interest rates across the world and their economic effects will continue to constrain trade performance in December,” Mr. Terosa said, also citing the looming recession in the US.

Mr. Mapa noted the smaller trade gap should help lift economic growth in the fourth quarter.

“Meanwhile, we expect more of the same in December with a slight moderation possible for exports,” he said.

The PSA will release the fourth-quarter and full-year 2022 GDP report on Jan. 26.