Trade gap persists, though smaller, as June imports surge, exports dip

EXTERNAL TRADE in goods likely dragged economic growth in the second quarter as sales abroad of locally made products dipped in June while imports continue to grow, based on data released by the government yesterday.

Sales abroad of Philippine-made goods were roughly flat in June, posting a 0.1% contraction to $5.7 billion. While the reading was a reversal from June 2017’s 17.1% growth, it was the smallest decline recorded so far this year and was better than May’s 1.8% contraction.

The latest merchandise export figure brought year-to-date receipts to $32.732 down 3.8% from $34.035 billion in the same six months last year.

At the same time, imports increased 24.2% to $9.050 billion in June, faster than the 12.6% recorded in May and 0.6% in June 2017. Year-to-date, imports rose by 13.2% to $51.837 billion from $45.785 billion a year ago.

The country’s balance of trade in goods registered a $3.350-billion deficit in June, smaller than May’s $3.69 billion but bigger than the $1.586-billion shortfall recorded in June 2017.

The trade deficit widened to $19.105 billion year to date from the $11.749-bil lion gap recorded in 2017’s comparable six months.

For the second quarter alone, the deficit was $10.520 billion this year versus $5.647 billion in 2017 and $8.585 billion in the first quarter of this year.

By commodity group, exports of manufactured goods — which accounted for 85% of the total overseas sales — grew by 3.2% to $4.853 billion. Exports of electronic products grew 13.5% to $3.352 billion. Exports of mineral products fell by 37.5% to $257.740 million, while shipments of agro-based products were down by 4.9% to $420.177 million.

For imports, mineral fuels, lubricant and related materials grew by 32.5% to $1.053 billion. Imports of capital goods, raw materials and intermediate goods, as well as consumer goods grew 30.1% (to $3.062 billion), 21% (to $3.382 billion), and 15.6% (to $1.517 billion), respectively.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), said that import figure for the month can be attributed to “the push for more infrastructure development in the country and increasing investments, both public and private.”

Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (LANDBANK), was of the same opinion: “Imports surged in June, as the country’s upbeat investment climate fuelled the importation of capital and intermediate goods,” he said.

As for flat growth in exports, the economists noted the sluggish external demand for some of the country’s key commodities. They said, however, that the weakness of the peso helped somewhat in the improvement of exports.

For LANDBANK’s Mr. Dumalagan, the widening trade deficit might pose a drag to the country’s second-quarter economic performance albeit smaller compared to the previous quarter.

“A negative balance of trade subtracts some points from economic growth. Compared with the first quarter, however, the deduction from net trade might be lower in the second quarter amid some improvement in exports,” Mr. Dumalagan said.

“The balance of trade may remain in deficit for the rest of the year driven by higher inbound shipments of capital goods, which are needed for the government’s ‘Build, Build, Build’ program.”

For UnionBank’s Mr. Asuncion: “This 2018, exports are expected to continue with recovery although slowly; while imports are still expected to outpace exports due to strong demand for public and private investments.”

Mr. Asuncion noted that even with the expanding trade deficit, the country’s macroeconomic fundamentals seem to be intact.

“[A] lot of observers are also saying that there are emerging risks and the widening trade deficit is one of them,” he said.

“For me, this is still a net positive for the country because the data also shows that Philippine trade is still growing steadily even amid the global threat of trade wars.” —