WEAK Philippine exports in May reflect waning global economic activity that analysts warn could drag the country’s overall gross domestic product (GDP) growth this year.
Merchandise exports tumbled 17.4 percent year-on-year in May to their lowest level in three-and-a-half years, with no prospect of a rebound seen in the immediate horizon given the economic slowdown in China and fallout from the Greek debt crisis.
Exports value dropped to $4.899 billion in May from $5.932 billion a year earlier, marking its biggest drop since December 2011, when outbound shipments contracted by 18.9 percent.
Analysts at the Bank of the Philippine Islands (BPI) noted that major export destinations outside Japan all posted lower-than-expected growth prints in May.
“The global malaise has also taken its toll on commodity exports, with mineral products posting a -66.5 percent slowdown. Cyclical gains seen in wood manufactures and electronics seem to have petered out after export orders in the previous year were fulfilled, leaving a hole in demand for 2015,” the analysts said in a BPI commentary.
Fallout from slowing exports also mirrored weakness in imports, they said.
A rebound may not be expected until the latter part of the year when major trading partners get past their first-half stumble.
“Gains, however, may be limited given the strong export numbers in the latter half of 2014, which will make base effects difficult to hurdle,” the BPI commentary added.
UK-based investment bank Barclays believes the fall in April and May exports added downside risk to the bank’s 6.5 percent growth forecast for the Philippines this year.
Barclays’ growth forecast is higher than the 6.1 percent expansion in GDP achieved in 2014 but falls below the 7 percent to 8 percent growth target of the government for 2015.
“May’s weak showing was accentuated by a high base and one fewer working day, compared to last year. As with April, the weakness was driven by non-electronics—mining, machinery and agriculture, industries with higher local content,” they said in a research note.
Looking ahead, Barclays analysts said the recent pickup in the US ISM (Institute of Supply Management) suggests stronger external demand could support a recovery in exports in the coming months, although China’s slowdown is likely to remain a drag.