Inbound shipments still up 2% in 2015
Philippine merchandise imports plunged by 25.8 percent in December, the steepest fall in six years, but ended 2015 still up from a year earlier.
Inbound shipments declined to $4.056 billion year on year, the Philippine Statistics Authority (PSA) reported on Wednesday, in the biggest drop since a 37.1-percent contraction in April 2009.
The result capped the full-year merchandise imports tally to $66.686 billion, 2 percent higher compared to 2014’s $65.398 billion.
The National Economic and Development Authority (NEDA) said it was optimistic that imports would recover this year given increased demand and investor confidence. Analysts shared the view, saying the December drop may have been a blip.
The PSA said contractions were recorded for nine out of the top 10 imported commodities. The biggest decliner was food and live animals (-47.9 percent), followed by feed stuff for cereals not including unmilled cereals (-33.1 percent); electronic products (-30.3 percent); miscellaneous manufactured articles (-18.1 percent); mineral fuels, lubricants and related materials (-14.1 percent); telecommunication equipment and electrical machinery (-9.0 percent); iron and steel (-5.4 percent); transport equipment (-3.3 percent); and industrial machinery and equipment (-3.2 percent).
The sole gainer was metal products, which rose by 19.8 percent in December.
The country’s trade position posted a surplus of $603 million, a reversal of the revised $977-million deficit recorded in November and the $667-million deficit recorded a year earlier.
The trade deficit for the full year increased to $8.037 billion for 2015 from $3.296 billion a year earlier.
The NEDA said imported capital goods—a leading indicator of strong economic activity—remained resilient in December as it increased by 20.9 percent to $1.5 billion, accounting for 37.8 percent of total merchandise imports.
A downturn in imports of raw materials and intermediate goods (-53.2 percent) and consumer goods (-20.3 percent), however, pulled down total imports for the month, it added.
Import payments for raw materials and intermediate goods declined in December with lower imports of materials and accessories for the manufacture of electrical equipment (-74.1 percent) sourced mainly from Taiwan, Japan and Singapore.
This partly mirrored a decline in global electronic and semiconductors sales in December 2015 due to softening global demand, the NEDA claimed.
Electronic products remained the country’s top import with a 31.6 percent share. In value terms, the Philippines purchased $1.280 billion worth, down 30.3 percent from a year earlier’s $1.837 billion.
China was the top source of imports in December, accounting for 17 percent of the total. Following were Japan, the United States, Singapore, South Korea, Th ailand, Taiwan, Saudi Arabia, Malaysia and Indonesia.
Joey Cuyegkeng, ING Bank Manila senior economist, said the declines for many items could be isolated cases as economies were winding down for the year. He also noted a challenging first quarter as indicated by January’s financial market turmoil.
“But things have stabilized a bit while key drivers of the January turmoil are being addressed or considered by policymakers of major economies,” he said.
The ING economist said domestic demand growth was continuing to power growth of other imports.
“We believe that domestic demand would remain strong and would see some recovery for domestically demand targeted imports in the near term,” he said.
Nevertheless, Cuyegkeng said the government should be vigilant as the December drop could be an indication of near-term weakness.
Jeff Ng, economist at Standard Chartered Bank, said some volatility could have caused the surprise fall.
“Imports of capital goods remained strong, indicating continued investment expansions near-term. However, import growth of raw materials and consumer goods fell sharply. This may imply that there were inventories building up,” he said.
Going forward, Ng expects imports to outperform exports this year, helped by solid domestic demand.
Strong demand, confidence
The NEDA also said strong domestic demand and growing investor confidence in the country would support imports growth in the near term.
The agency expects household consumption to stay strong given upbeat consumer confidence, low inflation, low interest rates, better employment opportunities, and a positive remittance outlook.
Sluggish global growth remains the primary downside risk, NEDA Deputy Director-General Margarita Songco said, adding that a downturn in major trading partners such as Japan and China might drag down imports, particularly intermediate goods used for electronics exports.
“The Philippines’ sound macroeconomic fundamentals should continue to attract attention from investors, both domestic and foreign. The government must pave the way to sustain this renewed interest through institutionalizing reforms from the past five years,” she said.
Steps to ensure that reforms are sustained, she said, include the passage and implementation of the Philippine Competition Act (Republic Act 10667), amendments to the Cabotage Law (RA 10668), and the Tax Incentives Management and Transparency Act (RA 10708), and approval of the Customs Modernization Tariff Act.