Imports decline to 10.8% in November 2014

MANILA, Philippines – Lower payments for capital goods, lubricants, and mineral fuels largely negated merchandise imports growth in November, declining to 10.8%, the National Economic and Development Authority (NEDA) reported Tuesday, January 27.

The decline follows the reported rebound in October, as the Philippine Statistics Authority (PSA) reported in December that total Philippine imports grew by 7.5% to $5.2 billion from $4.8 billion in October 2013.

Philippine imports growth also contracted to 2.6% in September, NEDA reported.

For November 2014, PSA reported that total import payments fell to $5 billion from $5.6 billion in November 2013.

The import value of capital goods also slumped to $789.4 million, a sharp 59% reduction from $1.9 billion, PSA reported.

Sources of contraction

NEDA director-general Arsenio M. Balisacan said that the negative performance of capital goods was due to the decrease in imports of aircraft, plus boats and ships.

There was also a reduction in the import value of telecommunication equipment and electrical machinery.

Declining global oil prices brought down the value of inward shipment of mineral fuels in November, Balisacan said.

As such, the prevailing low oil price environment, which is expected to persist until 2015, may further increase the country’s total oil importation given the country’s high dependence on imported oil, Balisacan added.

But the higher value of imported raw materials, and intermediate and consumer goods partially mitigated the overall decline in imports during the month, NEDA reported.

Imports of consumer goods will likewise remain positive for December, mainly supported by the uptick in domestic consumption primarily of food, Balisacan noted.

Total payments for imported raw materials and intermediate goods increased by 49.4% to $2.5 billion in November 2014 from $1.7 billion in November 2013.

For January to November 2014, the imports bill grew by 2.8% to $58.5 billion from $57 billion a year ago.

With faster growth in exports at 10.2% and a 19.7% record high in November beating China anew, the trade-in-goods deficit for the first 11 months of 2014 narrowed significantly to $1.5 billion from $5.2 billion in the same period in 2013.

The People’s Republic of China remained as the country’s top source of merchandise imports in November 2014 with a 16.2% share to total imports bill.

The rest of the top 10 sources are Saudi Arabia (10.0%); US (9.7%); Japan (9.6%); Singapore (8.3%); South Korea (7.8%); Malaysia (6.1%); Thailand (5.5%); Taiwan (4.1%); and Indonesia (3.9%).

Pros and cons

NEDA noted that the global economic environment remains fragile, with many developed economies confronted with various economic uncertainties, including deflation, precarious fiscal positions, and slowing consumer demand.

But the continuing low prices of oil bode well for the country’s consumer activity, given the relief from hikes in fares, utility costs, and other consumer items, Balisacan said.

Industrial activity also benefits from the reduction in operating costs – an opportune time to implement programs to encourage backward linkages among domestic industries, the economic planning secretary said.

“These include programs that improve productivity through the use of technology and that facilitate access to credit, such as those of the Departments of Trade and Industry and Science and Technology (DTI and DOST),” Balisacan said.

On the flip side, Balisacan noted that low oil prices entail reduction in revenues from oil taxes and duties, and may thus cause the government’s fiscal position to worsen should low oil prices persist.

As such, Balisacan urged policy makers to implement alternative measures such as increasing excise taxes on petroleum products to recover or offset lost revenues from customs duties so as not to compromise development objectives tied to the national budget. – Rappler.com