Trade gap narrows in June 2019 as Philippines imports less steel
MANILA, Philippines – The Philippines' trade deficit narrowed in June to $2.47 billion from the $3.55 billion a year ago, the Philippine Statistics Authority (PSA) reported on Wednesday, August 7.
Overall value in trade during that month amounted to $14.49 billion, down by 5.8% from $15.39 billion in June 2018. Of this amount, 58.5% or $8.49 billion were imports, while 41.5% or $6 billion were exports.
Exports increased by 1.5%, while imports decreased by 10.4%.
A trade deficit occurs when a country imports more goods than it exports.
Socioeconomic Planning Secretary Ernesto Pernia attributed the external trade slowdown in part to the ongoing trade disputes, Brexit-related uncertainties, and rising geopolitical tensions.
"Despite the challenging external environment, the Philippines has shown resilience in its trade performance. The Philippines is among the countries in Asia with positive export growth," he said.
The Philippines got less of the following top products that it usually imports:
- Iron and steel (-40.3%)
- Cereals and cereal preparations (-29.4%)
- Industrial machinery and equipment (-20.7%)
- Plastic in primary and non-primary forms (-16.4%)
- Transport equipment (-12.6%)
- Telecommunication equipment and electrical machinery (-12.2%)
- Mineral fuels, lubricants, and related materials (-7%)
- Other food and live animals (-6.7%)
- Miscellaneous manufactured articles (-0.1%)
The Philippines reported lower imports for iron and steel, even though the government made it clear that it wants more infrastructure projects.
In May, there was a 25.5% drop in iron and steel imports.
Among the imported commodity groups, import bills of electronic products, valued at $2.39 billion, accounted for the biggest chunk with 28.1% share to total imports.
China was the Philippines' biggest supplier of imported goods with 22.8% share to total imports. Other major import trading partners were Japan ($822.60 million), South Korea ($678.1 million), the United States ($602.98 million), and Thailand ($521.37 million).
Rizal Commercial Banking Corporation chief economist Michael Ricafort said the latest decline in imports may be attributed to the higher base from a year ago, worsening of the trade war between the US and China, as well as government underspending due to the delayed passage of the 2019 national budget.
He also noted that imports are likely to improve in the coming months as the government catches up on implementing infrastructure projects.
Ricafort also observed a slow growth in loans in recent months. Loans are used to finance the purchases in imports.
The National Economic and Development Authority said only 11 out of the 75 infrastructure flagship projects are now in the construction phase.
"Further speeding up the rollout of approved projects and processing of those in the flagship list are called for to boost government spending to provide needed stimulus to economic growth," Pernia said.
On the other hand, the Philippines saw 7 of its top 10 major export commodities grow. These are:
- Cathodes and section of cathodes, of refined copper (41.7%)
- Fresh bananas (24.4%)
- Ignition wiring set and other wiring sets used in vehicles, aircraft, and ships (17.6%)
- Gold (10.1%)
- Electronic products (4.3%)
- Machinery and transport equipment (3%)
- Other mineral products (1.1%)
By commodity group, electronic products continued to be the country's top export with total earnings of $3.54 billion. This amount, which accounted for 59% of the total exports' revenue in June 2019, moved up by 4.3% from the $3.4 billion export receipt in June 2018. (READ: Weak demand, U.S.-China trade war hamper Philippines' top export)
Exports to the US posted the highest value of $974.36 million or a share of 16.2% to the total exports in June 2019. Other major export trading partners were Japan ($874.18 million), China ($824.85 million), Hong Kong ($812.53 million), and Singapore ($336.24 million).
Ricafort said the improvement in exports may have to do with the low base or denominator a year ago, a diversification of the country's export markets and export products over the years, as well as improved diplomatic relations with the country's major export markets such as Japan, China, South Korea, other Asian countries, and the US.
"Positive growth in Philippine exports, though relatively modest, could still be sustained throughout the year despite the lingering US-China trade war and the resulting slower global economic growth, as the country continues to expand export markets and export products around the world, including non-traditional export markets," Ricafort said. – Rappler.com