Export drop persists in November, though smallest in eight months

By Kia B. Obang
Senior Researcher

THE DECREASE in sales of the country’s goods to foreign markets persisted in November last year in the face of a continued slump in global demand, even though that drop was the smallest in eight months.

Preliminary data the Philippine Statistics Authority (PSA) released yesterday show merchandise exports receipts slipped 1.1% year on year to $5.1 billion in November, a reversal of the 19.7% increase logged in 2014’s comparable month. November’s drop was the smallest since April.

“Meeting our export targets has been very challenging as the global economy remains weak, which translates into weak demand for the country’s export products,” Economic Planning Secretary Arsenio M. Balisacan said in a statement issued by the National Economic and Development Authority (NEDA).

“Given the performance of the export sector in the first 11 months of 2015, the full-year target is unlikely to have been met,” said Mr. Balisacan, NEDA’s director-general, in reference to a $65-billion goal that reflected a projected 4.7% increase from 2014’s actual $62.102 billion.

He said exports would have to log a total of $11 billion, equivalent to a growth of 129%, in December to hit the full-year target.

The government has two projections for merchandise exports: the Development Budget Coordination Committee’s downward-revised 4% assumption and the Export Development Council’s 8-10% goal.

Merchandise exports — which have historically accounted for up to 40% of gross domestic product (GDP) — contracted 5.8% annually year-to-date.

Despite shrinking for most of last year, exports could count on electronics to provide a lift going forward, Mr. Balisacan said, citing the 20-month high in Japan’s manufacturing purchasing output growth that signals “solid growth in the Philippine’s top export market.”

Japan was the Philippines’ top export market in November with a 21.3% share of the total, followed by the United States (14%), Hong Kong (10.9%), China (9.8%) and Taiwan (7.6%).

BUCKING THE TREND
“The country’s positive performance in the sales of semiconductors bucked the international trend as worldwide sales were down in November 2015,” said Mr. Balisacan.

“Thus, the modest growth in exports of goods from the electronics and semiconductors segment is expected to continue propping up total merchandise exports.”

Sales of manufactured goods, which made up 90.4% of total export bill in November, went up 3.6% to $4.6 billion. Of this, electronics comprised 54.2% and grew by 9.3%, accelerating from the 7.3% rise in October but still slower than the 26.6% gain a year earlier.

Semiconductors, which comprised the largest electronics export at 38.3% of the total, rose by 5.7% year-on-year.

Nicholas Antonio T. Mapa, associate economist at the Bank of the Philippine Islands, agreed that the latest export reading was driven mainly by electronics shipments, as “expansion in this sector reflects possible modest but steady demand for semi-finished electronics products.”

“[B]ut despite the near-double digit growth of more than half of the export basket, the total print was still below water,” he said in an e-mail.

“So are exports really recovering? Probably not our other sectors, which had driven the unusual strong performance in 2014.

PSA data showed sales of garments plunged by 42.7% in November, followed by chemicals which dropped by 39.4%. Exports of furniture and fixtures also suffered 34.9% drop that month.

Standard Chartered economist Jeff Ng said it was “still too early to call it a recovery, as export growth to most major economies was weak.”

“We still see some headwinds for export growth at least for the next six months. We think that net exports may still pose limited support to growth in the fourth quarter,” he said in an e-mail.

But DBS Singapore economist Gundy Cahyadi remained hopeful, saying separately via e-mail: “As long as electronic exports continue to post decent growth, we are not too worried about the export numbers.”

“We know it is mostly a result of the weak global demand and there is not much that the policymakers can do to alter this.”

Mr. Cahyadi said GDP growth this year would likely pick up to 6.1%, against the government’s 7-8% goal, while inflation is set to be relatively low at 2.5%.

“And more importantly, the economy is still very much dependent on the domestic economy. At this juncture, we continue to view that the economy is still in a sweet spot,” he said in an e-mail.

GDP grew 5.6% in the first nine months of 2015 against an official 7-8% full-year target, but Mr. Balisacan as early as August conceded growth could settle between 6-6.5%. In order to hit just 6%, the economy would have to have grown by 6.9% in the fourth quarter. PSA is scheduled to release 2015 fourth-quarter and full-year data on Jan. 28.