The Philippines’ trade deficit narrowed in January from a year earlier, but continued to widen month-on-month as inbound shipment remained higher than the country’s exports, official data showed on Friday.
“The balance of trade in goods (BOT-G) for the Philippines in January 2017 registered a deficit of $2.314 billion, lower than the $2.638 billion trade deficit in the same month last year,” the Philippine Statistics Authority (PSA) said in a statement released with the trade data.
Based on these figures, the trade deficit in January contracted by 12.3 percent from the year-earlier level. But compared with the $2.15 billion trade gap in December, the January balance was wider by 7.2 percent.
Exports in the first month of 2017 surged 22.5 percent year-on-year to $5.13 billion, while imports rose 9.1 percent to $7.44 billion, data from the PSA showed (See related story Jan exports surge 22% above).
Higher deficit seen
While ING Bank Manila regards the year-on-year surge in January exports as a welcome relief, it expects imports to go through a slowdown after two years of very strong growth, especially in the inbound shipment of capital equipment.
“The cycle normally sees slower investment goods import growth after a very strong [performance, such as in] 2015 and 2016,” ING Bank Manila senior economist Joey Cuyegkeng explained.
This, he said, should result in a more moderate deterioration of the trade deficit, but he added that ING still expects this year’s trade gap to be bigger than in 2016.
Last year, the country’s trade deficit hit $24.93 billion, expanding by 104 percent from a $12.24-billion shortfall in 2015.
“This means that the economy still needs to grapple with a widening trade deficit,” he warned.
Going forward, he said a higher trade deficit, accompanied by local political noise and a tighter US monetary policy and higher interest rates, could bring about another year of weakness for the Philippine peso.
To date, the peso trades around its weakest level in more than two years, closing today at P5x.x to the US dollar. It hit the P50:$1 level again in November last year as bets on an interest rate hike in the US—which actually happened in December —favored the dollar.
Innovation, infra dev’t
The government’s National Economic and Development Authority (NEDA), focusing on the 14.2 percent increase in total Philippine trade to $12.57 billion in January, said the country is now riding the wave of economic growth in the region.
“As such, we must continue to push for innovation and infrastructure development to fuel our momentum and
drive us to the forefront of the race,” Socioeconomic Planning Secretary Ernesto Pernia said in a statement on Friday.
“We must support our fast-growing economy by strengthening our production capability and linkages, particularly in agriculture and manufacturing, to help us meet both internal and external demands,” the Cabinet member said.
All Asian economies posted positive trade figures for January, with Indonesia registering 21.1 percent growth, Singapore 19.9 percent, Malaysia 12 percent and China 11.4 percent.
“This is a signal that our efforts in forging better relations with our Asian neighbors and the EU are finally paying off,” Pernia said.
However, global growth and trade risks remain, given US protectionist policies that may hamper global recovery could meet counter-measures that may be imposed by its trading partners.
“Aside from increasing our attractiveness and competitiveness through economic reforms, we need to diversify our market and take advantage of our existing multi-lateral and bilateral trade agreements to expand opportunities for our producers,” Pernia added.