Trade gap narrows on export growth, import drop

By Jochebed B. Gonzales
Researcher

FASTER merchandise export growth in July, coupled with a bigger decline in imports, narrowed the country’s trade balance to its smallest deficit in 17 months, the Philippine Statistics Authority (PSA) reported yesterday.

Value of merchandise exports grew 10.4% annually to $5.285 billion in July, according to PSA’s preliminary results, faster than June’s 5.8% and a turnaround from July 2016’s revised 10.9% fall to $4.787 billion.

On the other hand, import payments dipped 3.2% year-on-year to $6.931 billion in July, bigger than June’s 1.3% drop but a reversal of July 2016’s revised 4.6% increase to $7.159 billion.

Consequently, the country’s trade deficit shrank to $1.646 billion in July, narrower than the gaps of $1.992 billion and $2.373 billion in June and July 2016, respectively. July’s deficit was the smallest since February 2016’s $1.290-billion trade gap.

To date, merchandise exports grew 13.8% to $36.569 billion while imports increased by a slower 7.9% to $51.232 billion.

That resulted in a $14.663-billion balance of trade deficit as of July that was 4.6% smaller than the $15.370-billion gap recorded in 2016’s comparable seven months.

“Our country’s trade performance is consistent with the Asian trade growth,” said Socioeconomic Planning Secretary Ernesto M. Pernia in a statement by the National Economic and Development Authority (NEDA), which he heads as director-general.

Mr. Pernia was referring to “remarkable growth rates” of merchandise exports of some Asian economies that month, particularly South Korea (31.8%), Malaysia (31.6%), Hong Kong (26.2%), Thailand (24.2%) and Vietnam (16.4%).

“We are optimistic that higher growth will be achieved for the remaining months of the year,” Mr. Pernia said.

Export of Philippine manufactured goods, which made up 84.6% of the total sales in July, picked up by 8.7% to $4.472 billion. Electronic products, which made up around 52.2% of the export total, rose 11.8% to $2.762 billion with semiconductors contributing $2.003 billion, up 13.4% from $1.767 billion a year ago.

Outbound shipments of mineral products surged 59.6% to $319.524 million while foreign sales of agro-based products were up by 3.27% to $377.306 million.

Exports to Japan went down 1.1% to $915.65 million, even as that market remained the top destination of Philippine goods with a 17.3% share. The US came second with exports climbing 1.66% to $811.95 million, accounting for 15.36% of total outbound shipments that month. Exports to Hong Kong, meanwhile, surged 26.23% to $717.07 million from $568.08 million, grabbing the third spot.

Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. noted “an indication now that exports will maintain a double-digit growth.”

“If that happens, we’ll consider increasing our target from 3.0% currently” for this year, Mr. Ortiz-Luis said.

State macroeconomic managers have separate growth projections this year of 5.0% for merchandise exports and 10% for merchandise imports.

Union Bank of the Philippines, Inc. (UnionBank) chief economist Ruben Carlo O. Asuncion attributed July’s export growth partly to a weaker peso that plunged to 11-year lows that month, allowing the country’s exports to become cheaper for foreign buyers.

“Moreover, this competitiveness is supported by the continuing recovery of advanced countries’ economies especially our major trading partners such as the US, Japan and Korea,” Mr. Asuncion said.

On the flipside, the weaker peso also caused imports to slide further.

“Imports have become more expensive and importers are feeling this,” Mr. Asuncion noted.

The July import print marked the second straight month of decline after 1.3% in June.

Imports of raw materials and intermediate goods, which made up 37.57% of the country’s total purchase from abroad, contracted 8.21% to $2.604 billion. Likewise, capital goods, comprising 31.69% of the import total, fell 11.5% to $2.197 billion.

Bucking the trend were imports of consumer goods, which expanded 10.7% to $1.265 billion. Minerals fuels, lubricant and related materials were up 30.6% to $834.925 million.

China was the biggest source of imports, accounting for 17.2% of the total at $1.19 billion, though down 12.59% in July. Japan followed with an 11% share of $764.34 million that reflected a 12.61% decrease, while Korea placed third with $597.23 million, up 17.44%, accounting for 8.6%.

“This trend of increasing exports and declining imports may continue on the backdrop of a weaker peso,” UnionBank’s Mr. Asuncion said.

“However, I see the imports decline as temporary with the continuing emphasis on developing the country’s major infrastructure.”