Philippine merchandise imports grew only slightly in February, losing momentum from the double-digit pace recorded a year earlier and in January.
The Philippine Statistics Authority (PSA) on Tuesday said imports expanded by a meager 1.2 percent, slower than the 10.2 percent expansion recorded in February 2015 and the 30.8 percent growth in January 2016.
PSA noted, however, that despite the deceleration, growth was still recorded for seven out of the top 10 imported commodities, boosting overall inbound shipments to $ 5.414 billion from $5.351 billion a year earlier.
The National Economic and Development Authority (NEDA) said higher purchases of capital and consumer goods pushed the modest expansion of imports in February, while a private bank suggested that growth would be stronger during the rest of the year, barring a significant post-election impact on domestic demand.
2016 trade deficit narrows
The country’s trade balance in February posted a deficit of $1.104 billion, narrower than the revised $2.638 billion recorded in January but wider compared with the $837-million deficit recorded a year earlier.
Year to date, merchandise imports totaled $12.239 billion, up 15.8 percent from the $10.569 billion seen in January to February last year.
The trade deficit for the two-month period increased to $3.742 billion from $1.699 billion a year earlier.
Electronic products remained the country’s top import with a 28 percent share. In value terms, the Philippines purchased $1.518 billion worth, down 14.8 percent from a year earlier.
Also, imports of consumer goods increased by 26.3 percent to $934.2 million in February 2016 as higher spending was observed for both durable goods (39.4 percent) and non-durable goods (13.9 percent) during the period.
On the other hand, purchases of raw materials and intermediate goods, and mineral fuels and lubricants decreased during the period.
China was the top source of imports in November, accounting for 16.7 percent of the total. Following were Japan, the United States, Thailand, South Korea, Singapore, Taiwan, Indonesia, Malaysia and Vietnam.
Demand remains strong
NEDA, in a statement, said that positive growth indicates that amid a global economic slowdown, domestic demand, especially investments, remains strong.
“This will likely continue to drive imports growth within the short term,” said Socioeconomic Planning Secretary Emmanuel Esguerra.
With $2.2 billion worth of imports, inward shipments of capital goods grew by 57.5 percent in February 2016.
NEDA noted that this is the sixth consecutive month of double-digit growth for this commodity group, reflecting the country’s attractiveness to both local and foreign investors, particularly in the manufacturing sector.
“This also indicates a robust economic activity that is primarily supported by the country’s strong macroeconomic performance. The robustness of growth is reflected in the continuous upgrade and affirmation of the country’s investment grade rating since 2013,” Esguerra, who is also the NEDA director general, said.
Moreover, NEDA said among 11 selected Asian economies, only the Philippines posted positive imports growth in February 2016, with Thailand, South Korea, and China bore the steepest declines.
Going forward, NEDA pointed out that government’s spending program needs to gain traction particularly in the infrastructure sector, which will require higher importation.
“Bottlenecks in Manila’s ports must also be given serious attention to further bring down the cost of imported goods for domestic businesses and consumers,” Esguerra said.
‘Supportive investment growth’
Singapore-based lender DBS said import growth should be sustained in the rest of 2016 and lift gross domestic product (GDP) growth back into 6-percent territory. Last year, Philippine GDP slowed to 5.8 percent.
“The strong jump in the past year remains indicative of supportive investment growth in the economy,” it stated.
DBS stressed, however, that the aftermath of the May elections may make a difference, and said it is important to monitor how demand fares in the third quarter of 2016.
“Investment growth is expected to moderate ahead of May and pick up again soon after. And imports numbers going forward will provide the cues on this front,” it added.