The Philippines posted a record-high trade deficit in May as imports continued to surpass exports, the Philippine Statistics Authority (PSA) reported on Tuesday.
“The country’s balance of trade in goods (BoT-G) registered a $2.753 billion deficit, higher than the $2.240 billion deficit in May 2016,” the PSA said in a statement.
Exports rose by 13.7 percent to $5.48 billion year-on-year, while imports surged by 16.6 percent to $8.24 billion.
In the first five months of 2017, the trade deficit expanded by 3.9 percent to $11.04 billion from $10.62 billion a year earlier.
FDBS economist Gundy Cahyadi said the double-digit growth in imports last May reflected upbeat domestic demand.
The 0.1 percent drop in imports in April prompted some market participants to wonder if that was a sign of a marked moderation in domestic demand, Cahyadi noted.
“These participants forgot that import growth averaged 40 percent year-on-year last year ahead of the general elections. The poor import growth numbers in the past two months simply reflected high base effects,” he said.
It’s better not read too much into the imports data in April and May, Cahyadi noted. He pointed out that even if investment and consumption growth moderated, these were still considered relatively strong.
“Investment growth may still come in the double-digit territory and consumption growth is likely to remain circa 6 percent for the year. Overall GDP (gross domestic product) growth is still set to exceed 6 percent this year,” he said.
The National Economic and Development Authority (NEDA) sees the balance of trade staying in deficit this year on the back of demand for capital goods for major construction projects in the country.
“To the extent that capital equipment is going to be used this year if there are major construction projects, there’ll be more capital goods imports,” Socioeconomic Planning Secretary Ernesto Pernia said.
Pernia said the country should continue to promote export competitiveness, diversify products and markets, and maximize trade agreements to sustain trade growth for the rest of the year.
“Our country’s trade growth is consistent with the global pick-up. We are striding forward with world trade performers and we intend to match this growth with sound macroeconomic policies,” he said.
According to the PSA, total trade grew by 15.4 percent to $13.7 billion in May, bringing the year-to-date tally to $63.3 billion.
East Asian countries remain strong trading partners with 48.3 percent share of export revenue and 46.2 percent of imports.
Trade with the Association of Southeast Asian Nations (Asean) was also strong, with a 15.7 percent share of export receipts and 26.1 percent share of imports.
Asean was promising destination for exports, with shipments to the regional bloc growing by 25.6 percent in May.
Exports to the European Union were on a third consecutive month of double-digit growth at 38.5 percent.
The PSA said exports to Malta, India and the United Arab Emirates grew by 130.6 percent, 71.9 percent, 211.9 percent, respectively.
Trade with other Asian countries also posted double-digit growth, led by Vietnam (25.8 percent), Indonesia (24.1 percent), Malaysia (23.4 percent), and India (22 percent).
“As we aim to diversify our markets, we are pleased to note that our exports to Malta, United Arab Emirates and India grew significantly,” Pernia said.
In the next five years, the government expects Philippine exports to increase by $100 million annually as goods such as bags and wallets can enter the US market with zero tariffs starting July 1, 2017 after an expanded US Generalized System of Preferences was approved, according to NEDA.