Advertisement

Trade deficit likely to hit $28b

The country’s growing appetite for imported products will likely bloat the trade deficit to a record $28 billion this year, DBS Bank of Singapore said in a report Wednesday.

DBS said at the current pace, the trade deficit would account for almost 1 percent of gross domestic product, a record high, and likely put this year’s current account in a deficit of around -0.3 percent of GDP. 

Latest data from the Philippine Statistics Authority showed that merchandise trade deficit widened 16 percent year-on-year to $6.5 billion. Last year, trade deficit amounted to $24.5 billion, or double the $12.2-billion shortfall recorded in 2015.

DBS said despite the record trade deficit expected this year, foreign inflows such as remittances from Filipinos working overseas would help cover the gap.

“[There are] three reasons why we are not worried about this. First, overseas foreign remittance flows have also stayed robust. Foreign remittances came in at $2.6 billion in March 2017, also a record-high and this brings the first-quarter total to $7 billion,” the bank said.

“While there are still risks of a moderation going forward, total remittances are still set to reach about $28 billion this year. As long as remittances can offset the trade balance, the current account deficit will stay manageable,” DBS said.

The government said the widening trade deficit stemmed from a strong demand for imports rather than a slump in export growth. Both exports and imports increased 17 percent year-on-year in the first quarter.

DBS said the jump in imports growth was driven by a strong demand of both capital and consumer goods, adding that monthly imports of capital and consumer goods were some 60 percent and 30 percent higher, respectively, than levels in early-2015. 

“More importantly, external financing risks remain limited for now. Foreign reserves continue to provide more than 5x coverage of short-term external debt, among the highest in the region. As no significant change is likely in the near-term, the widening trade deficit is far from being a reason to panic,” DBS said.

Money sent home by Filipinos working overseas in March 2017 rose 10.7 percent to a record $2.615 billion from $2.362 billion a year ago, as demand for Filipino talents remained strong.

The March cash remittances was also higher than $2.169 billion in February. This brought cash remittances in the first quarter to a record $6.953 billion, up 7.7 percent from $6.457 billion a year ago.

Personal remittances, which include non-cash items, rose 11.8 percent in March to $2.915 billion from $2.606 billion a year ago. This brought personal remittances in the first quarter to $7.709 billion, up 8.1 percent from $7.134 billion.

Money sent home by Filipinos working overseas rose 5 percent in 2016 to $26.9 billion from $25.607 billion in 2015.  This surpassed Bangko Sentral’s projection of a 4-percent growth last year and the 4-percent actual growth in 2015.

The solid growth in remittances remains a backbone of economic growth. Remittances represented 8.1 percent of the gross national income and 9.8 percent of gross domestic product in 2016. GDP grew 6.9 percent last year.

Topics: Trade deficit , imported products , DBS Bank of Singapore , foreign inflows , remittances , overseas Filipinos workers , gross domestic product , GDP
COMMENT DISCLAIMER: Reader comments posted on this Web site are not in any way endorsed by Manila Standard. Comments are views by manilastandard.net readers who exercise their right to free expression and they do not necessarily represent or reflect the position or viewpoint of manilastandard.net. While reserving this publication’s right to delete comments that are deemed offensive, indecent or inconsistent with Manila Standard editorial standards, Manila Standard may not be held liable for any false information posted by readers in this comments section.
AdvertisementGMA-Congress Trivia 1
Advertisement