Increased capital goods importation for the government’s infrastructure projects will likely result in wider trade deficits in the coming months, Hongkong and Shanghai Banking Corp. said in a report over the weekend.
“Despite signs of stabilization in the trade deficit, we do not see meaningful improvements. The key reason is that infrastructure capital outlay and related capital goods imports are likely to accelerate in 2H23 [second half of 2023], in line with the government’s push to prevent underinvestment versus the approved program,” HSBC said.
It said the second State-of-the-Nation Address by President Ferdinand Marcos Jr. and the recent speeches by Finance Secretary Benjamin Diokno suggested that infrastructure investments remained a key priority of the administration.
“Meanwhile, a bottoming electronics sector may lend limited help, given 70 to 80 percent of electronics exports are typically offset by related imports. In addition, tuition-related remittance inflow may fade in August, according to the historical pattern,” it said.
The National Economic and Development Authority board approved on March 9, 2023 194 infrastructure flagship projects with a total amount of P8.3 trillion.
These projects are aligned with the priorities under the 8-Point Socioeconomic Agenda of the President and the Philippine Development Plan 2023-2028.
These high-impact and urgently needed infrastructure projects aim to showcase the government’s Build-Better-More program.
These projects will be prioritized under the government’s annual budget preparation and will benefit from the expedited issuance of applicable permits and licenses consistent with current legal frameworks.
The balance of trade in goods is the difference between the value of exports and imports.
Trade deficit fell by 21 percent in May to $4.396 billion from a gap of $5.56 billion in the same period last year as exports expanded by 1.9 percent and imports contracted by 8.8 percent.
This resulted in a $23.988-billion trade deficit in the first five months, slightly higher than $23.963-billion shortfall a year ago.