PHILIPPINE merchandise imports recorded their steepest drop in nearly five years at 13.4 percent in May, accelerating the fall from the preceding month and the year earlier, with the major segment of electronic products largely accounting for the plunge, the latest government data showed on Friday.
The total value of imports in May fell to $4.391 billion from $5.069 billion in May 2014, according to preliminary figures from the Philippine Statistics Authority (PSA).
Accounting for more than 20 percent of the receipts in May, electronic products remained the top commodity group shipped in during the period, with value recorded at $1.17 billion, down 12.2 percent from $1.33 billion in the year-earlier period.
Other merchandise that posted negative growth, according to the PSA list, were transport equipment; mineral fuels, lubricants and related materials; iron and steel; plastics in primary and non-primary forms; miscellaneous manufactured articles; other food and live animals; and telecommunications equipment and electrical machinery.
The 13.4 percent overall decline in May imports marks the biggest fall since October 2009, when inbound shipment tumbled 16.8 percent, according to the National Economic and Development Authority (NEDA).
The contraction accelerated from the yearearlier drop of 3.9 percent, and the revised 12.2 percent plunge in April.
Taking into account the export figures for May, released earlier, the trade balance for that month returned to a surplus of $508.86 million, reversing a $337 million deficit registered in April.
China was the top source of Philippine imports, accounting for 16.4 percent of the total value, followed by the United States, Japan, South Korea, Singapore, Taiwan, Thailand, Indonesia, Malaysia, and Germany.
Cumulative imports in the first five months of the year contracted 7.4 percent to $24.80 billion from $26.78 billion a year earlier. That resulted in a narrowing of a cumulative trade deficit for January to May to $1.28 billion from $2 billion.
The NEDA said despite the fall in import value in May, more goods were actually purchased in volume terms. In a statement on Thursday, the NEDA said the volume of total imported merchandise grew 7.1 percent, even though total payments were down 13.4 percent.
Explaining the higher import volume, the NEDA said: “This is driven by expected robust demand from consumers, an expected uptick in construction-related activities and the higher volume of production from the manufacturing sector,” Socioeconomic Planning Secretary Arsenio Balisacan said.
Balisacan, who is also the NEDA director general, noted the volume of imports of key production inputs such as capital goods and raw materials, as well consumer goods expanded in April and May 2015, indicated that growth in the domestic economy is likely to be sustained for the remainder of the quarter.
Imported capital goods continued to post double-digit growth for the fourth straight month in May at 12.8 percent.
“The still bullish importation of capital goods should bode well for the country’s productive sectors particularly industry and services. The year-on-year expansion in inward shipments of power generating machines, as well as office, telecommunications, and land transportation equipment remains robust,” Balisacan said.
He added that strong growth in fixed capital investment is expected to continue in the second semester and will remain as one of the major drivers of growth going forward.
Support for MSMEs
Balisacan said the government should remain supportive of business, especially the micro, small and medium enterprises (MSMEs), and also encourage greater linkages with agriculture.
“The government should also aggressively improve the quality and quantity of our infrastructure. All these will further encourage more participation from the private sector,” Balisacan concluded.
Analyst sees return to expansion
Imports may bounce bank in line with increased demand for Philippines exports, analysts from the Bank of the Philippine Islands (BPI) said after the release of the PSA data.
“Philippine imports are seen moving back into expansion on increased demand from major trading partners for Philippine exports, with economic conditions expected to improve in the second half of 2015,” BPI said in a research note.
“The effect of cheaper crude oil prices is seen ebbing as we get closer to the inflection point in oil prices as base effects are washed away,” it said.
In terms of monetary policy, the BPI said the overall effect of disappointing trade numbers on Philippine economic growth will not be met by policy response from the central bank as authorities view the weakness in economic activity as due to anemic government spending.