Down 15.1% on weak China, global demand
PHILIPPINE merchandise exports posted their steepest drop in six months in March as the global economy remained lacklustre, prompting a call by the economic planning body for non-traditional export destinations and new products to widen the country’s market base.
Exports slid 15.1 percent to $4.611 billion in March from $5.434 billion a year earlier, with seven of the 10 major commodity groups accounting for the decline, data from the Philippine Statistics Authority (PSA) showed Wednesday.
The March figures mark the biggest drop in outbound shipments since the 15.5-percent fall in September 2015. In February, exports slipped by 4.5 percent.
For the first three months of the year, exports fell 8.4 percent to $13.109 billion from $14.304 billion in the corresponding period in 2015.
The National Economic and Development Authority (NEDA) said the country needs to look for non-traditional export destinations and products to widen its market base as the global economy continued to show weak demand.
Although electronics continued to provide key support, the sharp overall decline in March could widen the trade deficit, an analyst warned.
The seven major exports that posted declines were apparel and clothing accessories at 52.2 percent, chemicals (40.7 percent), metal components (29.8 percent), machinery and transport equipment (25.9 percent), electronic equipment and parts (25.4 percent), other manufactures (24.5 percent), ignition wiring set and other wiring sets used in vehicles, aircrafts and ships (16.2 percent)
On a positive note, electronic products, the country’s biggest export with a 51.1 percent share of the total, increased 1 percent to $2.356 billion from $2.332 billion for the same period a year earlier, while semiconductors decreased by 0.4 percent to $1.645 billion from $1.652 billion.
Japan was the Philippines’ top market in March, accounting for 21.5 percent of outbound shipments worth $991.43 million. This was, however, down 13.6 percent from $1.147 billion a year ago.
The United States came in second with a 16.4 percent share or $672.85 million. It was followed by Hong Kong, China and Singapore.
No global pickup soon
In a statement on Wednesday, NEDA said widening the market base of Philippine exports is a necessary step amid the challenging global economy.
“The country’s traditional trade partners continue to post subdued growth, global trade is not expected to pick up soon, and China’s slowdown is impinging upon overall growth in emerging economies,” said Socioeconomic Planning Secretary Emmanuel Esguerra.
Among 11 selected Asian economies, the NEDA said only Vietnam, China and Thailand posted positive export gains while the Philippines saw the steepest decline during the period.
Lower revenues from several major trading partners also dragged exports in March, it noted.
“To be able to reach out to other potential export markets and sell our products, it is crucial to ease government regulation and strengthen market intelligence gathering in partnership with the private sector. We also need to maximize the opportunities in trade agreements and economic groupings particularly within the Asean [Association of Southeast Asian Nations] region,” Esguerra, who is also the NEDA director general, said.
Esguerra also said exports need to grow by at least 8.3 percent in the next three quarters to attain the low-end projection of the Export Development Council of 5.4 percent in 2016.
Wider trade deficit
Jeff Ng, economist at Standard Chartered Bank, said weak export growth may pose further downside to the trade deficit.
For the first two months of 2016, the country’s trade balance showed a deficit of $3.742 billion, wider than the $1.699 billion a year earlier.
Nonetheless, Ng said services exports and remittance growth should still support the current account surplus this year, which is expected to contribute 2.5 percent to gross domestic product this year.
“Electronics exports remain a key support. The key drag remains in non-electronic manufactured goods,” he added.
NEDA said total earnings from manufactured products dropped by 11.1 percent to reach $4.0 billion from $4.5 billion in the same period last year.
“This is a reflection of a general slowdown in the global manufacturing sector. On the upside, wood manufactures, and iron and steel posted positive growth rates in March 2016. Electronic exports also reached its tenth consecutive month of positive growth during the period,” said Esguerra.
In the short to medium term, he said it is important to promote industry and national competitiveness by crafting policies to move domestic industries into higher-value niches in the global value chain (GVC), and inducing multinational enterprises, which are lead firms in the GVCs, to locate in the country.