Weak demand, U.S.-China trade war hamper Philippines’ top export

MANILA, Philippines – The Department of Trade and Industry (DTI) said external forces caused the March 2019 decline in the outbound shipment of electronics, the country’s constant top exported merchandise.

Trade Secretary Ramon Lopez said in a statement on Thursday, May 9, that merchandise exports were affected by the United States-China trade war, as these two countries are among the Philippines’ top trading partners. (READ: 19 deals with Chinese businesses signed during Duterte’s China trip)

Lopez also said industry players pointed to overall weaker global demand. The poor appetite for electronics and electronic parts is seen to continue for the rest of the year.

The Philippine Statistics Authority last Wednesday, May 8, reported that electronics exports, accounting for over half of the country’s exports, dropped by 3.7% to $3.35 billion in March. Total merchandise export performance went down by 2.5% to $5.88 billion.

The Philippines experienced lower exports in certain electronics subsectors such as components and devices, control and instrumentation, and telecommunication products to major markets like Singapore and Hong Kong.

“In general, we consider this as a reflection of the slowdown in the global economy,” Lopez said.

“Out of 11 trade-oriented Asian economies, 9 countries declined in their export performance and only Vietnam and China registered positive performance.”

South Korea saw its merchandise exports drop by 8.7%, followed by Indonesia with 8.7%. Singapore also experienced slower export performance by 6.3% and Japan’s performance dropped by 3.9%.

Weathering the storm

Due to weak global demand, Lopez said local manufacturers are focusing instead on the domestic market.

“For example, a quick check with a major producer of shrimps and prawns revealed that they stopped exporting and instead concentrated their sales and distribution in the domestic market,” he said.

“This can partially explain the 22% decline of our exports of shrimps and prawns in the 1st quarter of 2019.” (READ: Farm output growth slows to 0.67% in Q1 2019)

Despite the lackluster export performance in the 1st quarter, the DTI still targets a range of $122 billion to $130 billion by 2022 under the Philippine Export Development Plan.

The DTI itself is working on “lingering issues” that weigh down on the costs of manufacturing in the Philippines, such as logistics and transportation.

The DTI is also exploring the country’s non-traditional markets such as Eastern Europe, South Asia, and Latin America. This is aside from the trade deals being pursued with traditional partners such as the US and Indonesia.

“These markets are expected to experience high economic growths and with their huge population can provide for alternative export markets in the near future,” Lopez said.

The National Economic and Development Authority on Wednesday also urged local manufacturers to diversify their products as well as look for new markets. (READ: Philippines, South Korea to pursue free trade agreement)

Socioeconomic Planning Secretary Ernesto Pernia said the Philippines should attract more multinational companies to locate in the country, expanding local production in the process.

“To put the Philippines in a more competitive stance, it is crucial to open up domestic sectors to foreign participation through the proposed amendments to the Foreign Investment Act, Retail Trade Act, and Public Services Act,” he added. – Rappler.com