Exports fall a 4th month, widen trade gap

By Christine Joyce S. Castañeda
Senior Researcher

MERCHANDISE TRADE remained a drag on overall economic growth last quarter, as export receipts declined for the fourth straight month in March while import payments continued to increase.

Preliminary data released by the Philippine Statistics Authority (PSA) said merchandise exports declined by 2.5% year-on-year by the end of the first quarter. This resulted in sales of $5.876 billion in March from $5.222 billion in February and $6.024 billion in March 2018.

This marked the fourth straight month of export decline following contractions in February (-0.1%), January (-6.7%) and December 2018 (-12.2%).

At the same time, import payments rose 7.8% to $9.014 billion in March, accelerating from the upticks of 2.6% in February and 3.6% in January.

To date, payments for the import of goods grew by 4.7% to $26.179 billion on a cumulative basis against the nine percent goal of the interagency Development Budget Coordination Committee (DBCC) for full-year 2019.

March results brought year-to-date export receipts to $16.377 billion, a 3.1% decrease from the $16.906 billion in the first quarter of 2018 and below the DBCC’s six percent growth assumption for this year.

Consequently, the country’s balance of trade in goods in March registered a deficit of $3.138 billion, widening from the $2.744 billion in February and $2.340 billion in March 2018.

On a cumulative basis, the trade deficit widened to $9.801 billion in the first quarter, larger than the $8.103-billion shortfall in the first three months of 2018.

In a statement, the National Economic and Development Authority (NEDA) attributed the decline in merchandise exports to the decrease in sales of electronics and petroleum products.

ELECTRONICS DEMAND WEAKENS
Electronic products — which accounted for more than half of export earnings — declined by 3.7% to $3.231 billion from $3.354 billion recorded in the same period of 2018.

Year-to-date, overseas sales of electronic products slipped by 1.7% to $8.841 billion.

Outbound shipments of manufactured goods, which accounted for 82.5% of total exports, went down 3.8% to $4.848 billion from $5.037 billion in March 2018.

Petroleum products — with a 0.3% share — likewise decreased by 66.9% year on year to $17.109 million.

On the other hand, exports of agro-based products grew by 5.4% to $436.418 million. Exports of forest and mineral products likewise grew by 24% to $30.813 million and 8.1% to $407.792 million, respectively.

On the import side, purchases of consumer goods posted the highest growth at 21.4% to $1.485 billion.

This was followed by imports of capital goods, which registered a 13.2% growth in March to $2.894 billion. Imports of raw materials and intermediate goods also increased by 5.5% to $3.471 billion.

Bucking the trend was the import of mineral fuels, lubricant and related materials which saw a decline of 12.6% to $1.091 billion.

Union Bank of the Philippines, Inc. (UnionBank) chief economist Ruben Carlo O. Asuncion attributed the “expected” weak export performance mainly to “softness in external demand.”

“Regional trade, largely international trade has been expected to be weak this year due to uncertainties in world trade prospects brought by the trade negotiation issues between the two biggest economies in the world, namely, the US and China,” Mr. Asuncion explained in an e-mail.

For imports, Mr. Asuncion said that the faster growth “can be rooted from last year’s momentum” due to increased demand for capital goods and equipment as government ramps up infrastructure spending.

In a separate email, Rizal Commercial Banking Corp. (RCBC) economist Michael L. Ricafort blamed the trade results to low external demand brought by the slowdown in global economic growth due to the simmering US-China trade war and “Brexit-related uncertainties.”

The wider trade deficit may have affected first-quarter gross domestic product (GDP) results that will be reported by the PSA today.

“Wider trade deficits or net imports could still somewhat be a drag on economic growth,” RCBC’s Mr. Ricafort said.

For his part, UnionBank’s Mr. Asuncion said that while trade continues to be a drag on economic growth, it would be offset by the recovery in household demand amid inflation’s continued slowdown from a nine-year-high 6.7% in September and October last year.

“A slight uptick in the biggest chunk of the economy would be significant enough to offset a decline, particularly, a trade balance drag,” Mr. Asuncion explained, referring to household spending that fuels nearly 70% of GDP.

For Mr. Asuncion, export performance is “expected to continue its softness” unless “overall global trade prospects become more positive.”

“On the other hand, imports may continue to grow as the… government continues with its ambitious infrastructure development program,” he added.

The government is encouraging exporters to diversify their products in order to expand their market reach, NEDA quoted its director-general, Socioeconomic Planning Secretary Ernesto M. Pernia, as saying in a statement.

“To match this effort, the government continues to explore non-traditional markets such as Eastern European countries and is seeking to strengthen ties with traditional trading partners,” Mr. Pernia said, adding that the Export Marketing Bureau of the Trade department is looking at non-electronics products such as cars, desiccated coconut, coconut oil, and footwear & wearables “as new export growth drivers,” among others.

The United States was the Philippines’ top export market in March with a 15.4% share at $906.33 million, down 3.1%, followed by Japan’s 15.2% ($892.20 million, down 1.2%), Hong Kong’s 14.1% ($829.02 million, down six percent) and China’s 12.5% ($732.15 million, down 2.2%).

The first quarter saw Philippine export sales to the US, which accounted for 16.1% of the total, grow 4.7% to $2.644 billion. Philippine shipments to Japan, which accounted for 15.9%, fell by four percent to $2.612 billion, those to Hong Kong, which accounted for 13%, dropped eight percent to $2.132 billion, while those sold to China, which contributed 12.5%, increased by 2.3% to $2.052 billion.

Meanwhile, China was the Philippines’ top source of imports in March with a 21.4% share ($1.925 billion, up 50.2%) followed by Japan’s 9.8% ($882.87 million, down 3.8%) and the United States’ 7.9% ($712.43 million, up 12.2%).

Year-to-date, imports from China, which accounted for 21.3% of the total, grew 24.9% to $5.579 billion; those from Japan, which made up 9.7%, fell 2.2% to $2.539 billion; while those from the US, which made up 7.3%, slipped 0.6% to $1.907 billion.