By Lourdes O. Pilar, Researcher

THE Philippines’ trade deficit in goods shrank to a six-month low in August, as exports increased while imports fell, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary data from the PSA showed the country’s trade-in-goods deficit — the difference between exports and imports — narrowed to $3.54 billion in August. This is 19.4% down from the $4.4-billion deficit in the same month in 2024.

Month on month, the trade gap shrank from the revised $4.42 billion in July.

August saw the narrowest trade deficit since the $2.97-billion gap in February 2025.

Exports went up by 4.6% to $7.06 billion in August, slowing from the 17.6% increase in July but faster than the 0.4% growth in August 2024.

This was the slowest pace of export growth in eight months or since the 1.9% drop in December 2024.

In terms of value, outbound trade in goods in August is the smallest in four months or since the $6.78 billion recorded in April.

On the other hand, imports in August fell by an annual 4.9% to $10.6 billion, ending two straight months of growth. This was also a reversal of the 2.9% growth in August 2024, and the sharpest decline in 14 months or since the 7.2% slump in June 2024.

Import value was the lowest in six months or since the $9.76 billion in February 2025

8-MONTH TRADE GAP
For the first eight months, the trade deficit narrowed to $32.38 billion, 5.7% lower than the $34.33-billion deficit during the same period a year ago.

The country’s trade balance has been in deficit for over a decade or since the $64.95-million surplus recorded in May 2015.

For the January-to-August period, total outbound sales of Philippine-made goods increased by 12.6% to $55.7 billion, while imports rose by 5.1% to $88.08 billion.

The Development Budget Coordination Committee (DBCC) projects a 2% contraction in exports and 3.5% growth in imports this year.

“The narrowing of the country’s trade deficit in August, compared with a year ago, can be attributed to weak import growth. Although exports grew by 4.6% year on year, the 4.9% decline in imports resulted in a smaller deficit in August,” Cid L. Terosa, senior economist at the University of Asia and the Pacific, said in an e-mail.

He said that export growth slowed in August due to the implementation of US tariffs, which led to economic uncertainty, business caution, and market hesitation.

“Slow export growth in August can also be attributed to trade tensions that continue to strain the global economy. The weak growth trajectory of the global economy has hindered export growth in many developing countries, including the Philippines,” added Mr. Terosa.

The US began imposing a 19% tariff on Philippine goods starting Aug. 7.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said in an e-mail that the trade deficit was mainly caused by a “substantial pullback in imports month to month,” reflecting “quite a severe deterioration in domestic demand” in the third quarter.

“While the narrower deficit is welcome from the standpoint of the peso, its real economic implications are quite concerning,” he said.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines said that the trade deficit narrowed because of stronger exports and a notable drop in imports.

“Export growth was led by electronics, gold, and mineral products, while imports declined due to lower fuel and raw material purchases,” said Mr. Asuncion.

He noted the decline in imports reflected weaker domestic demand and lower global commodity prices. On the other hand, export growth moderated due to softer demand and base effects, he added.

In August, manufactured goods, which accounted for the bulk of the country’s total export receipts, rose by 2.3% year on year to $5.61 billion.

Electronic products, which made up almost three-fourths of manufactured goods and more than half of total exports in August, grew by 8.5% to $3.87 billion.

Almost half of total exports came from semiconductors, which jumped by 12% to $3.02 billion.

Exports of mineral products also expanded by 25% to $728.16 million in August, while petroleum products declined by 18.8% to $22.78 million.

Hong Kong was the main destination of Philippine-made goods in August, accounting for 16.9% or $1.19 billion in export sales. Other top export destinations were the United States, which accounted for 15.4% or $1.09 billion and Japan, which accounted for 13.9% or $979 million.

DECLINE IN IMPORTS
Meanwhile, imports of raw materials and intermediate goods in August fell by 6.2% to $3.82 billion. These accounted for 36% of the total August import bill.

In August, imports of capital goods grew by 8% to $3.24 billion, while the imports of consumer goods also increased by 3.1% to $2.31 billion.

Imports of mineral fuels, lubricants and related materials fell by 34.2% year on year to $1.18 billion.

China was the top source of imports, accounting for 30.1% of the total or $3.19 billion of the total import bill in August. It was followed by South Korea with an 8% share or $848.93 million and Indonesia with 7.9% or $838.78 million.

Mr. Terosa said the decline in imports can be attributed to the weaker peso, which made imports more expensive.

“The ‘wait-and-see’ attitude of businesses, due to economic uncertainties caused by US tariffs, has led to lower purchases of capital goods, mineral fuels, transport equipment, and other manufactured goods and raw materials,” he said, adding that slowing global growth also dampened trade prospects.

Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said imports may have declined due to restrictions on agricultural imports, such as rice. He also noted imports of raw materials have also declined amid a slowdown in manufacturing, construction and infrastructure projects.

“It is a question of confidence. For investors and tourists there is a loss of confidence. We are the last choice now,” Mr. Ortiz-Luis said.

The outlook for trade remains cloudy amid global uncertainties, analysts said.

“Downside risks prevail, particularly if the US imposes a sector-wide targeted tariff on its semiconductor imports, which could greatly affect the Philippines’ own chip shipments,” Mr. Chanco said.

He noted the DBCC’s projected 2% contraction in exports this year is “overly harsh,” while the 3.5% growth forecast for imports is reasonable.

Mr. Asuncion said the DBCC’s full-year projections can still be achieved, but risks persist.

“Looking ahead, trade performance will hinge on global demand for electronics, commodity price movements, and domestic consumption trends. Exchange rate dynamics and geopolitical developments may also influence trade flows in the coming months,” Mr. Asuncion said.

“If global demand softens further, and commodity prices remain subdued, both exports and imports could decelerate in the fourth quarter.”