ON Friday, the Philippine Statistics Authority (PSA) released the country’s domestic trade data for the second quarter of 2016, and the news was very good.
For the April to June period, domestic trade increased by 39.3 percent year-on-year, from P113.93 billion in the second quarter of last year to P158.71 billion this year. By volume, domestic trade increased 27 percent to 4.72 million tons.
The country’s economy grew by 6.9 percent in the first half of the year, and so the domestic trade figures are not really surprising; with external demand in a slump—exports have been declining for more than a year— all that growth has to come from somewhere.
There are a couple interesting conclusions that can be drawn from the data of domestic trade, beginning with the fact that it was given more attention now than it usually has been given. The domestic trade data is gathered every quarter, but is generally not widely publicized; this quarter, however, the PSA made a little more effort to make sure it came to the attention of the media.
The obvious explanation for that is for the past few weeks the news about the economy has increasingly focused on potential instabilities and the country’s declining attractiveness to outside investors. Nothing counteracts bad impressions than actual positive data. The release of the domestic trade data is a stark reminder that the opinions of those on the outside are not necessarily shared by those inside.
Another significant point revealed by the data is that the economy’s absorptive capacity still heavily outweighs its productive capacity; demand is still higher than can be met with what the country can produce, which means there is still a lot more room for growth even in the absence of major developments like expanded infrastructure or tax reform. The evidence for this is in the faster increase in trade value compared with trade volume. The difference—a little more than 12 percent—is significantly higher than inflation, meaning that prices are increasing due to increasing demand, particularly in view of the fact that oil prices have remained low, and power costs have slightly decreased over the past several months.
For the past couple of years, the government and other credible sources like the BSP have been stressing that the Philippine economy is fundamentally sound, and will not be seriously harmed by external factors. The domestic trade data confirms that assertion.
Of course, there are still reasons to be concerned about external factors; while the Philippine economy is capable of generating a great deal of internal activity to compensate for declining external trade, no economy in this globalized world of ours can be completely self-sustaining. The country still needs to maximize its export markets, and still needs to attract as much foreign investment as it can. That is where concerns such as the perceived lack of a detailed economic plan and apparently out of control violence need to be addressed.
Having demonstrated domestic economic strength, it would be a mistake for the country—both the government and the private sector—to rest on those laurels and not build on that strength.