Import bill drops fastest in more than seven years in October

LATEST government trade data showed imports declining at their fastest pace in seven-and-a-half years in October while exports were flat, the Philippine Statistics Authority (PSA) reported on Tuesday.

Imports fell 10.8% year-on-year to $9.57 billion in October, slightly faster than the 10.5% decline seen in September, but reversing from the 26.2% growth seen in October 2018.

The October reading marked the seventh straight month of decline in import goods and was the fastest since the 13.3% decline in April 2012.

To date, the merchandise import bill declined by 4.3% to $90.22 billion from $94.23 billion in 2018’s comparable 10 months. This remained below the seven-percent target set by the Development Budget Coordination Committee (DBCC) for 2019.

On the other hand, the value of merchandise exports edged up 0.1% annually to $6.32 billion in October from $6.31 billion a year ago. This was a turnaround from the 1.2% decline recorded in September, albeit slower than the 6.7% growth in October 2018.

Goods sold abroad were up 0.03% to $58.96 billion from $58.94 billion on a cumulative basis against the DBCC’s two-percent target set for the year.

Trade deficit figured at $3.25 billion in October compared to a $4.42-billion trade gap in the same month last year. Cumulatively, the trade deficit reached $31.26 billion, smaller than the $35.29-billion gap in 2018’s comparable 10 months.

In a statement, the National Economic and Development Authority (NEDA) attributed the decline in imports to “reduced orders for raw materials and intermediate goods, capital goods, mineral fuels and consumer goods…”

Imports declined for all major types of goods in October. Purchases of raw materials and intermediate goods, which made up 35.8% of total imports that month, declined 19.3% to $3.42 billion from $4.24 billion in October 2018.

Capital goods, comprising 34.2% of the import total, were down 4.1% to $3.27 billion from $3.42 billion.

Also contracting were imports of consumer goods (-1.5% to $1.68 billion) and mineral fuels, lubricant and related materials (-13.3% to $1.12 billion).

On the export side, manufactured goods, which made up 84.7% of total sales in October, inched up by 1.1% to $5.35 billion from $5.29 billion previously.

Electronics, which made up around two-thirds of manufactured goods and more than half of the total exported goods, grew by seven percent to $3.54 billion in October, with semiconductors contributing $2.63 billion, up 8.9% from $2.42 billion a year ago.

Outbound shipments of agro-based products likewise grew by 10.5% to $450.04 million.

Bucking the trend were exports of petroleum products, forest products, and mineral products, which decreased by 26.8% ($53.49 million), seven percent ($25.4 million), and 5.8% ($303.36 million), respectively.

The country’s total external trade in goods — the sum of export and import goods — was $15.89 billion in October, 5.9% more than the $15 billion in September but 6.7% less than the $17.03 billion in October 2018, according to PSA data.

NEDA’s statement quoted Socioeconomic Planning Secretary Ernesto M. Pernia, its director general, as saying that the “modest recovery” in the country’s month-on-month external trade figures for October “backs the expectations that the export sector will remain relatively steady despite the global slowdown associated with the US-China trade war.”

Asked for comment, ING Bank NV Manila Branch Senior Economist Nicholas Antonio T. Mapa said the growth in exports, while muted, is a “welcome development… in light of the trade war…”

On the other hand, he noted the continued decline in imports to be a “worrisome trend.”

“The contraction in raw materials and capital goods point to lost productive capacity as investment activity faded in [the second and third quarters] of this year,” he said in an e-mail.

For Rizal Commercial Banking Corp. Economist Michael L. Ricafort, the decline in imports “may also be attributed to the relatively slower growth in bank loans… that are used to partly finance some imports…”

“[This is] somewhat reflective of the slowdown in capital formation and foreign direct investments, both of which also entail importation of capital equipment, raw materials, and other inputs,” he said.

“For instance, imports of industrial machinery and equipment declined year-on-year by $88 million or by 15%,” Mr. Ricafort said in a separate e-mail, adding that iron and steel imports during the month were also down 32% or by $168 million during the period.

For the coming months, Mr. Ricafort said the government’s catch-up spending “could lead to some pick up” in the imports of inputs that are needed for infrastructure projects such as steel, cement, and heavy equipment.

On the other hand, he added that “any positive developments” in the US-China trade talks “could lead to some improvement in the global economic outlook that would create an environment that is more conducive to faster growth in Philippine exports.”

NEDA’s Mr. Pernia said that “[p]ossible downside risks, particularly the lingering vulnerabilities and spillovers associated with the trade tensions, need to be managed.”

For ING’s Mr. Mapa: “The protracted trade war should weigh on exports overall and we will need to find a way to diversify our export portfolio given that more than 50% comes from electronics.” — Carmina Angelica V. Olano