Trade deficit widened 61% to $37.7 billion in 11 months

The trade deficit widened 19 percent in November to $3.9 billion from a $3.3-billion shortfall a year ago, as imports continued to grow while exports declined, the Philippine Statistics Authority said Thursday.

Nicholas Mapa, senior economist of ING Bank Manila, said these latest figures brought the merchandise trade deficit to $37.69 billion in the first 11 months of 2018, wider by 61 percent than the $23.4-billion gap registered in the same period in 2017.

Data showed exports dropped 0.3 percent in November to $5.57 billion and 0.9 percent in the 11-month period to $62.8 billion. Imports increased 6.8 percent in November to $9.5 billion and 15.8 percent in 11 months to $100.5 billion.

“With both the government and corporates doubling down on this capital-intensive growth, wide trade gaps will likely be the norm in the medium term.  Meanwhile, exports have seen a nice rebound but continue to lag outbound shipments with more than half of the entire portfolio linked to electronics,” Mapa said.

“Going forward, the current account will likely remain in the red as imports run away from outbound shipments.  Imports posted the slowest pace of growth since March mainly because of base effects and as inbound shipments for cars posted a hefty drop of 28.1 percent as fourth-quarter 2017 saw a car buying spree ahead of the Train [Tax Reform for Acceleration and Inclusion] law implementation,” he said.

The PSA said the 0.3-percent decline in exports in November was due to the decreases in export sales of the four of the top 10 commodities. These were chemicals (-16.9 percent); ignition wiring set and other wiring sets used in vehicles, aircrafts, and ships (-14.9 percent); electronic products (-1.6 percent); and coconut oil (-1.3 percent).

The 6.8-percent growth in imports for the month was driven by the expansion of the top 10 major import commodities. These were cereals and cereal preparations (113.5 percent), mineral fuels, lubricants and related materials (34.1 percent), iron and steel (24.9 percent), other food and live animals (19.9 percent), plastics in primary and non-primary forms (12.5 percent), industrial machinery and equipment (10.5 percent), telecommunication equipment and electrical machinery (4.5 percent), miscellaneous manufactured articles  (4.4 percent), electronic products (3.9 percent), and transport equipment (0.2 percent).

Electronic products continued to be the country’s top export with total earnings of $3.16 billion. This amount, which accounted for 56.7 percent of the total exports’ revenue in November 2018, decreased by 1.6 percent, from $3.21 billion export receipts in the same month of the previous year.  

Components/devices (semiconductors) comprised the biggest share of 42.5 percent among electronic products.  It posted a decrease of 2.5 percent, from $2.43 billion in November 2017 to $2.36 billion in November 2018.

Economic Planning Secretary Ernesto Pernia said moderation in global growth appeared inevitable in 2019. “Given a less encouraging global economic outlook, the country needs to ramp up the implementation of strategies outlined in the Philippine Export Development Plan 2018-2022,” he said.

Pernia said supporting micro, small, and medium enterprises would be necessary to increase their participation in global value chains. 

“Simplifying loan processes, provision of financial literacy trainings, and facilitation of linkages between MSMEs and large corporations are some ways to spur the internationalization of MSMEs,” Pernia said.   

Pernia also emphasized the importance of reforming the Foreign Investment Act to allow foreign firms to transfer manufacturing facilities to the Philippines to serve both the domestic and regional markets. 

“A widening current account balance due to rising capital goods imports and anemic exports growth is a cause for concern. The widening gap emphasizes the need to reform legislation to allow foreign investments in firms catering to the domestic market, in addition to expanding their exporting activities,” Pernia said. 

Topics: trade deficit , Philippine Statistics Authority , Nicholas Mapa , ING Bank Manila
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