Domestic commodity flows contract in Q4

By Carmina Angelica V. Olano
Researcher

LOCALLY TRADED GOODS declined in the fourth quarter of 2019, the government reported yesterday.

Preliminary results from the Philippine Statistics Authority (PSA) report on “Commodity Flow in the Philippines” showed the volume of goods traded during the last three months of 2019 contracted by 45.4% to 3.95 million tons from 7.24 million tons previously.

Likewise, the value of these traded goods shrank by 27.8% to P127.76 billion from P177 billion in the fourth quarter of 2018.

Commodity flow, also known as domestic trade, refers to the flow of goods in the country through water, air, and rail transport systems. The bulk, or 99.6%, of the trade was mainly facilitated through water transport systems.

Nine out of the 10 commodity categories monitored by the PSA reported a decrease in trade quantity. Food and live animals — which accounted for the biggest share of trade in terms of volume — fell 42.2% to 1.21 million tons. Similarly, its trade value went down by 50.9% to P20.75 billion.

The biggest decline was seen in “manufactured goods classified chiefly by material,” whose trade volume fell 76.4% to 389,952 tons. Its value also went down by 35.3% to P13.85 billion.

On the other hand, the quantity and value of trade in “commodities and transactions not classified elsewhere in the [Philippine Standard Commodity Classification]” rose by 323.1% (to 626,399 tons) and 140.6% (to P9.97 billion), respectively.

The National Capital Region was the top source of commodities in the fourth quarter, with outflows amounting to P42.59 billion. It had a domestic trade surplus of P32.49 billion.

Meanwhile, the Caraga Region was the top destination of commodities with total inflows reaching P28.97 billion, and posting a trade deficit of P23.06 billion.

“The fourth-quarter gross domestic product (GDP) picked up to 6.4%, which means that domestic trade, both in volume and value, has also increased. Thus, this recent data release was not expected at all,” said UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion in an e-mail.

Mr. Asuncion added that had commodity flows through land been included in measuring domestic trade activity, the fourth-quarter reading could have shown gains.

“I suspect that if there was a way to measure trade through land, this particular economic data would be correlated to economic growth, [that is], if GDP rises, domestic trade increases as well,” he said.

According to the PSA, the domestic trade data exclude the flow of goods through land due to the “absence of an approach to capture data in the archipelagic islands of the country.” Rail transport statistics were also not included, the PSA said, due to the rehabilitation and upgrade of state-owned Philippine National Railways.

Even so, Mr. Asuncion said the figures are “concerning” considering that the Philippine economy expanded in the fourth quarter. “An explanation can be that numbers are coming from higher bases because of higher economic growth compared to 2018,” he said.

On the other hand, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said the annual declines in domestic trade volume and value for the quarter were “expected” and “consistent” with the declines in manufacturing output and imports dragged by the effects of the US-China trade war.

“Fundamentally, the year-on-year declines in both local manufacturing output and in imports resulted in less volume and value of goods traded and transported throughout the country,” he said in an e-mail interview.

Mr. Ricafort also said the government underspending partly due to the almost four-month delay in the passage of last year’s national budget may have affected commodity flows as it “brought less materials or inputs especially for infrastructure projects traded and transported domestically.”

OUTLOOK
Domestic trade may be adversely affected by the ongoing coronavirus disease 2019 (COVID-19) outbreak, economists said.

“[For] the first quarter and succeeding quarters this year…the COVID-19 outbreak may have an impact on domestic trade, but estimating the potential impact may be difficult at this point,” UnionBank’s Mr. Asuncion said.

“Demand for goods that are actually traded may be driven by one’s perception of health and safety, and the threat of the COVID-19 spread can cause fear and can affect one’s consumption behavior,” he added.

For RCBC’s Mr. Ricafort, COVID-19 would “remain a major headwind” on domestic trade figures this year, with the slowdown in manufacturing output, exports, and imports acting as “offsetting factors” to any increased government spending this year.

Nonetheless, he noted domestic trade “could pick up” starting in the first quarter in view of the timely approval of the 2020 national budget as well as the extension of the validity of the 2019 budget.