PHL trade deficit narrows in April

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By Carmina Angelica V. Olano

THE COUNTRY’s trade-in-goods deficit narrowed in April as merchandise exports grew while imports declined, but did not prevent the year-to-date trade gap from increasing, according to data released by the Philippine Statistics Authority (PSA) on Tuesday.

Philippine trade year-on-year performance (April 2019)

The value of merchandise exports went up 0.4% annually to $5.51 billion in April from $5.48 billion a year ago, and slipped 6.7% from $5.91 billion in March.

This marked the first time it posted growth in five months or since the 1% growth logged in November 2018.

On a cumulative basis, merchandise exports were down 2.1% to $21.92 billion from $22.39 billion in 2018’s comparable four months. This was below the six-percent target set by the Development Budget Coordination Committee (DBCC) for 2019.

On the other hand, the merchandise import bill fell by 1.9% to $9 billion in April from $9.2 billion in the same month in 2018. This is the first time it posted a decline in four months or since December 2018’s -4.9%.

Year to date, merchandise imports posted a 2.9% growth to $35.18 billion from $34.19 billion in January-April 2018, against the DBCC’s 9% projection for the year.

These flows brought the country’s trade deficit to $3.5 billion in April, which is 5.4% less than the $3.7 billion shortfall last year.

Cumulatively, however, the country’s trade deficit grew 12.4% to $13.26 billion compared to last year’s gap of $11.8 billion.

In a statement, the National Economic and Development Authority (NEDA) noted the country’s total merchandise trade declined by one percent year-on-year to $14.51 billion in April from $14.66 billion in the same month last year.

NEDA attributed the decline in imports to reduced payments for raw materials and intermediate goods, the almost zero growth in capital goods imports, and the slowdown in the purchases of consumer goods.

On the other hand, NEDA noted the “continued recovery” of the exports of agro-based products as well as the uptick in the sale of manufactured goods.

Exports of manufactured goods, which comprised 84.1% of total sales in April, went up by 2% to $4.63 billion from $4.54 billion in the same month last year.

Electronics, which made up 56.7% of total export sales, grew 3% to $3.12 billion from $3.03 billion.

Agro-based products, which accounted for 8.1% of exports, saw a 23% growth to $444.68 million in April from last year’s $361.64 million. Exports of forest products likewise surged 16.8% to $23.71 million.

Bucking the trend were declines in the outbound sales of petroleum products (-94.2%) and mineral products (-2.7%).

Dragging imports were raw materials and intermediate goods, which posted a 16.3% drop to $3.31 billion in April from $3.96 billion in the same month last year.

Meanwhile, imports of mineral fuels, lubricant and related materials went up by 36.5% to $1.22 billion, followed by consumer goods with a 7.6% growth to $1.55 billion.

Capital goods, which accounted for 31.4% of total imports, recorded a 0.03% growth in April to $2.83 billion.

Economists said gains made in exports may be temporary as the electronics sub-sector may be affected by the ongoing US-China trade war.

“[Exports] managed to post a marginal expansion for April, tracking a similar bounce in technology partner countries like Taiwan and Korea for electronics in April. Given our reliance on the electronics sub-sector, the fortunes of the entire sector will likely be challenged given that Taiwan and South Korean semiconductor indices all headed south in wake of the escalating US-China trade war,” ING Bank N.V.-Manila Branch senior economist Nicholas Antonio T. Mapa said in an e-mail to reporters.

Mr. Mapa said the decline in imports “can be tied to the similar contraction in government spending.” He added that the flat growth in capital goods may be due to “elevated borrowing costs and the likely maturity in the investment cycle.”

“The budget delay, which put government projects on hold, led to the contraction of importation of construction materials,” Robert Dan J. Roces, chief economist at Security Bank Corp., said.

For exports, Mr. Roces explained that while seasonal demand for agro-based products may have pushed growth in the total exports figure in April, other goods “posted further contraction” during the period.

“[Semiconductors], in particular, [are] looking bleak as the pinch from the US-China trade war is starting to be felt…,” Mr. Roces said in a separate e-mail to reporters. “The fortunes of our exports number is closely tied with that of the electronics sector, with the data now showing low imports of raw materials used for electronics that may eventually point to weak electronics exports eventually.”

UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion noted bananas and gold led the export gainers.

“These are clearly commodity exports. These may be temporary increases, though,” he said in an e-mail.

Outbound shipments of bananas and gold rose by 76.7% and 36.1%, respectively. Bananas accounted for 3.2% of total exports, while gold contributed a 2.2% share.

The decline in import payments, Mr. Asuncion said, may be attributed to the slowdown in infrastructure spending.

“Note that due to the budget impasse, infrastructure spending was slower than initially planned,” he added.

According to UnionBank’s Mr. Asuncion, the US-China trade war fallout will continue to be a risk to local trade.

“Another would be the softer global demand in the long-term due to a possible economic slowdown brought by the trade conflict,” Mr. Asuncion said, adding that DBCC’s full-year targets may be difficult to achieve considering the current trade environment.

For Security Bank’s Mr. Roces, the trade war “may provide opportunities” for the country’s export sector “if sector-changing reforms are initiated.”

“To be able to transcend this trade war, Philippine trade may need to unbundle from just one product and develop a blueprint for supply chain enhancement of other products as well,” he said.

Socioeconomic Planning Secretary Ernesto M. Pernia, who is also NEDA’s director-general, noted the agency’s push for legislative agenda to make the export industry more competitive.

“To further drive exports up, we are looking at continuously increasing market access for Philippine products and reforms to improve productivity and lower production costs,” Mr. Pernia said in a statement.

He said the NEDA is pushing for amendments to the Public Service Act, the Foreign Investment Act, the Retail Trade Act, and the Tax Reform for Attracting Better and High-Quality Opportunities or TRABAHO bill.

“With the passage of these reforms, we can leverage the Philippines’ attractiveness to both foreign and local investors. These investments can help our industry to improve production efficiency and product diversification,” the NEDA chief said.