Up 11.7% in March; analyst sees rise too robust to be sustained
Philippine merchandise imports grew 11.7 percent year-on-year in March, with strong demand for capital and consumer goods powering a rebound after a 5.6 percent decline in
February, data from the Philippine Statistics Authority (PSA) showed on Wednesday.
Comparative year-earlier growth in imports stood at only 3.7 percent.
The overall inbound shipments in March 2016 rose to $6.358 billion from $5.691 billion a year earlier.
The National Economic and Development Authority (NEDA) said continued demand for capital and consumer goods drove import growth in March.
A private bank, however, said such robust pace of growth in the inbound shipments of capital goods is unlikely to be sustainable.
Trade deficit widens
The country’s trade balance in March posted a deficit of $1.747 billion, wider than the revised $1.104 billion recorded in February and the $257 million deficit recorded a year earlier.
In the year to date, merchandise imports totaled $18.597 billion, up 8.8 percent from the $17.089 billion seen in January to March last year.
The trade deficit for the first quarter increased to $5.488 billion from $2.784 billion a year earlier.
Electronic products remained the country’s top import with a 27.7 percent share. In value terms, the Philippines purchased $1.764 billion worth, up 30.1 percent from a year earlier.
Year-to-date data shows the country’s electronics imports rose by 21.92 percent to $5.549 billion from $4.552 billion posted in the first quarter of last year. The same eight electronic segments grew during the first quarter while automotive electronics declined by 21.7 percent.
In a monthly tally, March electronics imports were 13.11 percent higher than the $1.56 billion in February.
Other top performing commodities for the month were by iron and steel (up 66.3 percent), industrial machinery and equipment (up 50.4 percent), other food and live animals (34.9 percent), telecommunication equipment and electrical machinery (26 percent), and miscellaneous manufactured articles (14.1 percent).
In terms of commodity groups, NEDA said the import growth in March was due to higher purchases of capital goods at 24.1 percent and consumer goods at 39.4 percent.
“The continued strength of merchandise imports and the fact that it is fueled by spending on capital goods bodes well for the economy,” said Socioeconomic Planning Secretary Emmanuel Esguerra.
This growth also mirrors the positive aspects of the economy that are expected to be sustained for the rest of the year, he added.
Esguerra, who is also the NEDA director general, said imports of capital goods registered double-digit growth for the seventh consecutive month, reaching $2.1 billion in March 2016, which “bodes well for robust economic activity.”
Similarly, he noted that imports of consumer goods increased to $1.2 billion in March 2016 due to higher spending on both durable goods (up 67.9 percent) and non-durable goods (up 15.6 percent) during the period.
However, purchases of raw materials and intermediate goods as well as mineral fuels and lubricants declined during the period due to waning demand for wheat, inedible crude materials, and lower import payments for other mineral fuels and lubricants, and petroleum.
China was the top source of imports in March, accounting for 16.3 percent of the total.
Following were Japan, Thailand, the United States, South Korea, Singapore, Taiwan, Indonesia, Malaysia and Hong Kong.
Additionally, among 11 selected Asian countries, only the Philippines posted positive growth of imports in March 2016, according to NEDA.
South Korea, Malaysia and Taiwan showed the steepest declines, it said.
Infra spending critical
Given the general sluggishness of import activities in the region, government support for higher spending on infrastructure is critical not only because it supports domestic demand but more importantly, because it increases the country’s attractiveness to investors, Esguerra said.
The continued expansion of public and private construction, along with investments in durable equipment is expected to fuel imports growth in the near term, he said.
“Meanwhile, increased employment opportunities with increased government spending for personnel services and maintenance and operating expenditures will contribute to the growth of consumer goods imports,” he added.
With this, the NEDA chief stressed that the government needs to stay on course towards improving the climate for doing business in the country.
“This will improve our attractiveness to both local and foreign investors. The passage of the Customs Modernization Act is a step in this direction, as it will reduce opportunities for corruption and technical smuggling,” he said.
Growth to drop
Sounding a somewhat downbeat note, however, Singapore-based lender DBS expects imports growth to drop, seeing the robust imports of capital goods as unlikely to be sustainable.
“Once domestic demand normalizes as the election effect fizzles out, expect import growth to fall,” it said.
This is why the authorities are not too concerned about the trade balance going forward, the bank pointed out.
“More importantly, as far as the overall current account balance is concerned, foreign remittances remain above $2 billion per month, more than enough to cover the average $1 billion per month in trade deficit over the past year,” DBS concluded.