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Trade gap shrinks as imports fall, exports grow

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Manila International Container Port (MICP)

OVERSEAS SALES of Philippine goods grew for the fifth straight month in August but by the slowest pace in that period, while purchases of foreign goods saw their worst performance in six years that same month, making the merchandise trade gap narrow from July and from a year ago, the Philippine Statistics Authority (PSA) reported on Thursday.

Merchandise exports edged up by 0.558% to $6.251 billion in August, while imports fell by 11.769% to $8.66 billion — the biggest drop since April 2013’s 13.3% contraction — making the country’s trade deficit shrink by 33.062% to $2.409 billion from $3.599 billion a year ago.

Year-to-date, merchandise exports edged up by 0.133% to $46.642 billion, against a two percent official full-year target for 2019, while import payments dropped 2.839% to $71.345 billion, against a seven percent full-year goal.

For Socioeconomic Planning Secretary Ernesto M. Pernia, “We must continue to initiate programs that provide comprehensive packages of support for products with comparative advantages, including related industries, to facilitate expansion in the international market.”

“As subdued investments in emerging markets, coupled with persistent trade tensions, continue to hamper global expansion, implementation of timely reforms will vastly improve the country’s resilience to external shocks,” Mr. Pernia said in a press release.

The PSA reported that exports increased on improved sales of three of the top 10 major commodities, namely: gold (93.2%); ignition wiring set and other wiring sets used in vehicles, aircrafts and ships (7.6%); and electronic products (6.6%).




Imports’ decrease, on the other hand, was due to declines in eight of the top 10 major commodities, namely: iron and steel (-44.2%); transport equipment (-29.1%); cereals and cereal preparations (-23.4%); industrial machinery and equipment (-15.3%); mineral fuels, lubricants and related materials (-11.9%); plastics in primary and non-primary forms (-8.7%); electronic products (-6.0%); as well as other food and live animals (-4.4%).

ELECTRONICS
Electronics items continued to be the top export with $3.659-billion earnings, accounting for 58.529% of total value of merchandise exports in August and increasing by 6.557% from $3.433 billion a year ago. Components/devices (semiconductors) had the biggest share of 42.881% among the electronic products at $2.68 billion, 4.076% more than the year-ago $2.575 billion.

Year-to-date, electronics exports grew 1.905% to $26.054 billion, with components/devices (semiconductors) edging up 0.441% to $18.96 billion.

Electronic items — used as production inputs — were also the single biggest contributor to merchandise imports, accounting for 27.127% at $2.349 billion in August, down 6.039% from $2.5 billion a year ago, while components/devices (Semiconductors) dropped 14.399% to $1.555 billion.

Year-to-date, electronic imports actually grew 1.132% to $18,854 billion, although the components/devices (semiconductors) segment fell by 2.804% to $12.717 billion.

TYPE OF GOODS
By type of goods, manufactured items accounted for 83.232% of total merchandise exports at $5.203 billion, 1.092% more than the year-ago $5.147 billion. Year-to-date, exports under this category slipped by 0.221% annually to $38.841 billion.

This category was followed by exports of mineral products (6.852%) and total agro-based products (6.248%) amounting to $428.307 million (down 4.077%) and $390.557 million (1.836% more), respectively. Year-to-date, exported mineral products still grew 7.059% to $3.184 billion, while overseas sales of agro-based products increased by 8.132% to $3.307 billion.

In terms of imports, raw materials and intermediate goods contributed the biggest share of 35.322% to total value, falling 18.708% to $3.059 billion in August. Year-to-date, imports under this segment went down 9.96% to $26.46 billion.

Imports of capital goods came next with a 33.104% share or an import value of $2.867 billion, down 9.819%, while consumer goods placed third with a share of 18.896% at $1.636 billion. Capital goods imports still rose by 2.687% to $23,558 billion year-to-date, while foreign consumer goods bought 4.927% to $12.229 billion.

WARNING SIGNS
Noting the decline in importation of iron and steel (-44.2%), transport equipment (-29.1%), and industrial machinery and equipment (-15.3%), Security Bank Corp. Chief Economist Robert Dan J. Roces said in an e-mail that “The latest decline in imports… show that NG expenditures did not go into buying capital goods necessary for the infra[structure] spending program.”

“We reiterate that government expenditure, alongside household spending, will prove critical in driving growth to cope with a slowing global economy.”

For ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa, “With the import numbers showing a sustained pullback in investment machinery, third-quarter GDP may see capital formation struggle anew.”

“Sub-par growth will help convince the BSP to continue walking back 2018’s rate hike cycle with ING penciling further rate cuts in the first quarter of 2020,” Mr. Mapa said of the Bangko Sentral ng Pilipinas (BSP).

“Meanwhile, import compression coupled with surprise export growth moves in line with our fx forecast for only a mild depreciation for the peso by year end.”

MARKETS
The eight months to August saw the United States as the biggest market for Philippine goods with 16.429% at $7.663 billion, up 9.416%; followed by Japan (14.901% at $6.95 billion, down 0.549%); China (13.784% at $6.429 billion, up 7.483%); Hong Kong (13.297% at $6.202 billion, down -5.663%) and Singapore (5.414% at $2.525 billion, down 15.586%).

In terms of source of imports, China grabbed the top spot in the same eight-month period with 22.432% at $16.004 billion, up 13.084%; followed by Japan (9.429% with $6,727 billion, down 7.017%); South Korea (7.971% with $5.687 billion, down 21.976%) and the United States (7.222% with $5.153 billion, down 3.249%). — Jenina P. Ibañez

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