THE country’s trade deficit continued to narrow in October from a year ago, but slightly widened from September, the Philippine Statistics Authority (PSA) reported on Tuesday.
Data from the statistics agency showed that imports dropped by 10.8 percent year-on-year to $9.56 billion, while exports climbed by 0.1 percent to $6.31 billion.
As a result, the trade balance hit a deficit of $3.25 billion in October, lower than the $4.41 billion posted a year ago, but higher than September’s $3.03 billion.
Year to date, the deficit narrowed by 11.42 percent to $31.25 billion from $35.28 billion, as imports contracted by 4.3 amid the flat growth in exports.
In a comment, Rizal Commercial Banking Corp. (RCBC) economist Michael Ricafort attributed the latest trade numbers to reduced imports brought about by US-China trade war; slower growth in bank loans, which reflected the slowdown in capital formation and foreign direct investments; some government underspending on infrastructure projects; and lower global oil prices.
“Going forward, any partial/phase one trade deal between the US and China would be a step in the right direction and could lead to some improvement in global economic growth and global trade (including Philippine exports and imports),” Ricafort said.
“Catch-up spending by the government, especially on major infrastructure projects, could lead to some pick up in the imports of inputs needed for infrastucture/construction projects,” he added.
IHS Markit Asia-Pacific chief economist Rajiv Biswas, meanwhile, believes that an important positive factor in the October data was that exports of electronics increased by 7 percent year-on-year.
“As electronics is the most important merchandise export item for the Philippines, accounting for 56 percent of total merchandise exports, this indicates that a key export sector has been performing strongly,” Biswas said.
“Therefore a key medium-term challenge for the government will be to boost the competitiveness of the Philippines as a manufacturing export hub for industries, such as electronics and textiles,” he added.
For its part, the National Economic and Development Authority (NEDA) emphasized that exploring alternative production strategies, participating in international trade fairs and implementing consistent branding strategies are needed to increase the presence of Philippine products in the global market.
“The modest recovery in the country’s trade figures for October 2019 backs the expectations that the export sector will remain relatively steady despite the global slowdown associated with the US-China trade war,” Socioeconomic Planning Secretary Ernesto Pernia said in a statement.
This also aligns well with the country’s overall gross domestic growth target of 6.0 to 7.0 percent for 2019, he added.
The NEDA chief also explained that trade exports benefited from the uptick in earnings from agro-based products, mainly fruits and vegetables, and manufactured articles helped draw back the previous month’s decline to register a 0.1-percent gain in October.
On the other hand, inbound shipments decelerated by 10.8 percent as reduced orders for raw materials and intermediate goods, capital goods, mineral fuels, and consumer goods weakened overall growth of imports, he said.
“Possible downside risks, particularly the lingering vulnerabilities and spillovers associated with the trade tensions, need to be managed,” the Cabinet official added.
To counter external risks, he underscored the country’s need to improve competitiveness through the institutionalization of policies and processes that will streamline, facilitate and bring down the cost of doing business, which are important factors in making the country more flexible to any eventualities that may impact the economy.
“We need to take advantage of the country’s capacities on key products and building skills expertise and economies of scale to adapt and harness the benefits from emerging technologies like robotics and artificial intelligence,” Pernia said.
“This will also enable the sector to climb a notch in the global value chain and transition into more value-adding and specialized production,” he added.