PH trade gap widens as imports accelerate

THE country’s trade deficit more than doubled in April from a year earlier as imports surged and exports fell for a fourth consecutive month.

The Philippine Statistics Authority (PSA) reported on Friday that exports dropped by 8.5 percent to $5.11 billion while imports grew by 22.2 percent to $8.73 billion, bringing the balance of trade to a $3.62-billion deficit from the $1.55 billion posted in April last year.

Exports and imports a year earlier totaled $5.5 billion and $7.14 billion, respectively.

The National Economic and Development Authority said the 8.5-percent decline in exports was primarily due to non-electronic manufactured products such machinery and transport equipment, chemicals, and processed food and beverages, among others.

Tempering the drop was a 5.5-percent increase for electronic goods, which accounted for 69.1 percent of total outbound shipments in May. The NEDA noted that semiconductor export growth picked up to 5.3 percent from 3.1 percent in April, “reflecting the global trend”.

The 22.2-percent import growth, meanwhile, was attributed to a surge in demand for capital goods, raw materials and intermediate goods, consumer goods, and mineral fuels and lubricants.

Land Bank of the Philippines economist Guian Angelo Dumalagan told The Manila Times that the wider trade deficit could be attributed to strong investment spending.

“The surge in imports is not surprising given the government’s ‘Build Build Build’ program. The trade deficit also increased due to weaker exports,” he said.

Weather disturbances also likely contributed to the decline in outbound shipments by disrupting agricultural production, Dumalagan added,.

“Moving forward, the country’s balance of trade is likely to remain in deficit amid expectations of higher imports of capital goods. This has the effect of keeping the peso weak,” he noted.

“While a higher trade deficit subtracts some points from GDP growth, it is not totally bad for the economy, as an investment-led increase in imports could set the stage for stronger economic growth in the future.”

IHS Markit Asia Pacific chief economist Rajiv Biswas said the widening trade deficit reflected the strength of domestic demand.

“The further widening of the trade deficit and current account deficit for calendar 2018 is likely to be significantly higher than for 2017, which is likely to be negative for the peso,” he noted.

Socioeconomic Planning Secretary Ernesto Pernia called the imports result “encouraging” but added that “much has to be done to create an environment necessary for exporters to thrive”.

The recent signing of the Ease of Doing Business Act “is a step in the right direction,” he added, as this could bring down business costs and attract foreign investors.

Pernia also pointed to government efforts to expand agency links to TradeNet, the country’s link to the Asean Single Window that was established to enhance intraregional trade.

“Seizing the benefits of existing free trade agreements and forging new ties are equally important to expand the market for exports,” he said, with the government needing to make exporters more familiar with tariff classifications to find the best niches.

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