Philippine merchandise imports in December tumbled 10.6 percent from a year earlier, the sharpest contraction in two years, with five out of 10 major commodities posting declines, the latest government data shows.
The Philippine Statistics Authority (PSA) reported on Tuesday that imports in December fell to $4.869 billion from $5.445 billion a year earlier.
This marks the biggest drop in imports since the 13.3 percent fall recorded in December 2012.
The National Economic and Development Authority (NEDA) said in a statement the contraction in December imports was attributable to the plunge in oil prices, a trend that became more conspicuous during the last three months of 2014.
“Over the immediate term, the combination of strong world crude oil supply growth and weak global demand is expected to reduce imports via lower oil prices and possibly weaker demand for the country’s exports, thus tempering imports,” Socioeconomic Planning Secretary Arsenio Balisacan said.
The PSA data showed that significant decreases were recorded in the value of transport equipment (-51.2 percent); imported mineral fuels and lubricants (-36.8 percent); cereals and cereal preparations (-31.6 percent); miscellaneous manufactured articles (-10.3 percent); and industrial machinery and equipment (-9.7 percent).
Electronic products remained the country’s top imported commodity in December 2014 with a 34.8 percent share of total imports and reported value of $1.692 billion in December 2014. It increased by 32.3 percent from $1.279 billion in December 2013.
NEDA noted the higher value of imported raw materials and intermediate goods partially tempered the overall decline in imports during the month.Total payments for inward shipments of raw materials and intermediate goods reached $2.4 billion in December 2014, higher by 12.7 percent as opposed to $2.1 billion in December 2013, it said.
China remained as the main supplier of imported goods accounting for a 13.7 percent share of the total value of inward shipments in December 2014, followed by the US, Germany, Singapore, Japan, Taiwan, South Korea, Saudi Arabia, Malaysia and Thailand.
Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands aired some concern about the import totals. “This may be a worrisome sign in the sense that our import contraction was traced to the decline in imports which could increase our productivity capacity going forward,” he said.
Despite this, Mapa is optimistic that imports will recover in the coming months in line with the movement of international oil prices.
“We may see imports increase once again as the dollar value of crude oil has rebounded since December,” he said.
Trade gap narrows
Meanwhile, the PSA also reported that aggregate imports for the year registered a 2.4 percent increase to $63.923 billion in 2014 from $62.411 billion in same period of 2013 despite the contraction in December.
NEDA said that the full-year growth of the country’s merchandise imports relative to the country’s strongly performing merchandise exports reduced the trade-in-goods deficit in 2014 to $2.1 billion from $5.7 billion in 2013.
“This by far is the narrowest trade gap recorded since 2001,” said Balisacan, who is also the NEDA director general.
Balisacan pointed out that port congestion appears to remain a significant risk for both exports and imports growth.
He said that the lingering effects may have been felt by the sector toward the end of the year as both value and volume of major commodity imports (as well as exports) declined in spite of the holiday season.
“A more lasting solution to the port congestion and other transportation and logistics issues needs to be in place, specifically in Metro Manila where approximately 25 percent of all imports passes through.
Transportation constraints could further lead to unnecessary escalation of commodity prices,” he said.
What could sustain imports are domestic consumption and investment, he added.
Balisacan said that the manufacturing sector will likely continue its growth momentum, thus, keeping imports of raw materials and intermediate goods brisk.
“Also, stable prices, availability of jobs and more vigorous business activity are seen to further increase consumption spending that could support a healthier demand for imports of consumer products,” Balisacan concluded.