Trade gap narrows in February on weaker imports

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The Philippines trade-in-goods deficit narrowed in February. Courtesy of Department of Transportation

THE country’s trade-in-goods deficit narrowed in February as imports declined while exports grew, the Philippine Statistics Authority (PSA) reported on Wednesday.

Import payments declined 11.6% year on year to $7.057 billion in February, accelerating from the 2.8% contraction in January and a turnaround from the 2.9% growth in February 2019.

The latest reading marked the 10th consecutive month of decline for import goods since May 2019, according to revised PSA estimates.

To date, the merchandise import bill contracted by 6.8% to $16.350 billion from $17.550 billion in 2019’s comparable two months. This remained below the eight percent target set by the Development Budget Coordination Committee (DBCC) for 2020.

Meanwhile, the value of merchandise exports grew 2.8% annually to $5.401 billion in February from $5.252 billion a year ago. This was slower than the 9.4% growth in January but faster than the marginal 0.5% growth last year.

Export receipts were up 6.1% to $11.189 billion from $10.545 billion on a cumulative basis against the DBCC’s four percent target set for the year.

The trade balance figured in a deficit of $1.656 billion in February compared to a $2.733-billion trade gap in the same month in 2019. Cumulatively, the trade deficit reached $5.160 billion, smaller than the $7.006-billion gap in January-February 2019.

In an e-mail to reporters, ING Bank N.V.-Manila Branch Senior Economist Nicholas Antonio T. Mapa said the latest trade report “highlights the continued fade in investment activity” in February that is “likely linked” to concerns about the then initial spread of the coronavirus disease 2019 (COVID-19).

Capital goods, which made up around 32.7% of the country’s total imported goods, registered the biggest year-on-year decline among commodity groups at 16.2% to $2.306 billion.

Imports of mineral fuels, lubricant and related materials fell by 12% to $834.706 million, followed by those of consumer goods (-9.5% to $1.194 billion) and raw materials and intermediate goods (-8.7% to $2.660 billion).

Meanwhile, exports of manufactured goods — which accounted for 81.4% of the total export sales in February — increased by 1.3% to $4.395 billion.

Electronic products, which made up around 54.2% of total merchandise exports in February, grew by 3.4% year on year to $2.929 billion. Semiconductors, which accounted for 74.5% of electronics, rose seven percent to $2.182 billion.

Exports of agro-based products jumped 29.2% year on year to $429.014 million in February. Likewise, overseas sales of mineral and petroleum products were up by 5.3% (to $418.026 million) and 133.5% (to $38.123 million), respectively.

On the other hand, exports of forest products declined by 13.2% to $24.980 million.

“Exports managed to gain mainly due to base effects, driven mainly by the powerhouse electronics subsector which accounts for the bulk of our export portfolio,” ING’s Mr. Mapa said.


Economists expect the country’s exports and imports to drag in the near term amid the supply chain disruptions and sluggish external demand caused by COVID-19, as well as the government’s decision to extend the lockdown on Luzon island until April 30.

“In the near term, we can expect a reversal in export trends (demand for electronics will likely fall), but a continued contraction for imports as investment activity remains dormant (weaker capital and raw material imports), crude oil prices tank and consumer imports weaken further on depressed demand outside basic goods,” Mr. Mapa said.

The economist added that the enhanced community quarantine implemented in Luzon for another two weeks “will likely keep the trade deficit in the $2-billion range” on account of supply chain bottlenecks that kept demand for exports and imports constrained, as well as the global economy “headed for a likely recession.”

“In the near term, the ‘improving’ trade balance should be supportive to the peso but it is yet another ‘symptom’ (after faster inflation yesterday) pointing to economic malaise down the line. We’re in the incubation phase with the impending economic challenge set to hit us in the coming months,” Mr. Mapa said.

For University of Asia and the Pacific economist and former Tariff commissioner George N. Manzano, the trade situation “would definitely worsen” once the Luzon quarantine is taken into account.

“There would be an impact in the ports in which big chunks of manufacturing come from Luzon. The full extent and impact of the lockdown in trade will be manifested in March and subsequent months,” he said in a phone interview.

In a statement, the National Economic and Development Authority (NEDA) called for the government to “intensify” trade sector reforms.

“The public health emergency we are experiencing emphasizes the need to fast-track reforms to facilitate trade by reducing transaction costs. We must be creative in finding ways to ease the movement of goods and services while we continue to implement measures to combat COVID-19,” Socioeconomic Planning Secretary Ernesto M. Pernia was quoted in the NEDA statement as saying.

“We must aggressively pursue and prioritize the digitization of import and export documents, with the institutionalization of the TradeNet system as well as the utilization of cashless payments for all government services,” he said.

Aside from allowing the payment extension of rent, bills, and utilities, Mr. Pernia said the government can also help firms through a “temporary reprieve of demurrage and customs fees or waving of navigational charges” for the heavily hit airline industry.

“The country’s experience in responding to the COVID-19 pandemic has brought home the crucial importance of synergy of efforts of the government, private sector and citizens. Such cooperation in making limited resources work should be part of the new normal that will emerge after this pandemic,” Mr. Pernia said. — JEH