The country’s trade deficit widened by 51 percent in 2018 to a record $41.4 billion from $27.38 billion in 2017, as imports outpaced exports, the Philippine Statistics Authority said Tuesday.
Data showed that imports rose 13 percent last year to $108.92 billion from $96.093 billion in 2017, while exports fell 1.8 percent to $67.487 billion from $68.712 billion.
The PSA said that in December, the balance of trade in goods deficit reached $3.75 billion, as exports dropped 12.3 percent to $4.72 billion and imports declined 9.4 percent to $8.47 billion.
Export receipts decreased as shipments of manufactures, mineral and petroleum products fell. Imports declined as purchases of all commodity groups dropped in December 2018.
The National Economic and Development Authority said that as external challenges persisted, the merchandise trade growth in the Philippines and in most Asian economies softened in December.
“Merchandise trade in all the monitored Asian economies continued to weaken in the last month of 2018 as the region began to feel the impact of the weakening Chinese economy and the US-China trade tension,” Economic Planning Secretary Ernesto Pernia said.
“Policy uncertainty remains a threat to global trade, investment, and output, especially as US-China trade tensions continue. To mitigate this impact, the national government should continue to work on legislative reforms that will open up sectors for foreign investment,” Pernia said.
He said that given the widening current account deficit due to the trade gap, the proposed amendments to the Foreign Investment, Retail Trade, and Public Services Acts should be pursued.
“We should encourage foreign firms to transfer their manufacturing facilities in the Philippines and to take advantage of the growing domestic market,” he said.
The full implementation of the Ease of Doing Business and Efficient Government Service Act of 2018 is also being pushed to eliminate bureaucratic and regulatory barriers that raise the cost of doing business in the country, Neda said.
Nicholas Mapa, a senior economist of ING Bank Manila, said consumer imports were hit by the one-off effects of the car buying spree in late 2017. He also noted the pullback in capital goods and raw materials in December.
“If this continues, this could show that recent aggressive tightening by the BSP is starting to bite into investment appetite, hampering the nascent investment-driven growth story that we’ve witnessed of late,” Mapa said.
The Bangko Sentral ng Pilipinas last year increased the benchmark interest rates by a total of 175 basis points to 4.75 percent to rein in inflation.
Mapa said the recent tightening cycle of the BSP might hinder imports growth to some extent while fuel imports would also likely be smaller in 2019.
He said exports were seen to remain lackluster given the country’s dependence on the electronics sector to carry the entire export base amid the US-China trade war.
“Overall, the trade gap will remain relatively wide in 2019, which could continue to exert a weakening bias on the peso throughout the year,” Mapa said.