Trade deficit remains high at $3.5 B in Aug.

The country’s trade gap remained above the $3-billion level for the fifth month in a row this year as imports continued to outpace the growth in exports, data from the Philippine Statistics Authority (PSA) showed yesterday.

The statistics office reported that the Philippines incurred a trade deficit of $3.513 billion in August, marginally lower compared with the previous month’s $3.546 billion, but way higher from P$2.737 billion in the same month last year.

In August, exports grew by only 3.1 percent year-on-year while imports accelerated by 11 percent.

The Southeast Asian country has been posting large trade gaps since last year, widening its current account deficit and adding pressure on the peso, which has been languishing near 13year lows against the US dollar.

Despite the nation’s wide trade deficit, Socioeconomic Planning Undersecretary Rosemarie G. Edillon noted that trade growth was maintained amid global challenges.

For this reason, Edillon said the government must continue supporting key and emerging export sectors to maintain the country’s trade expansion.

Based on the PSA data, the country’s total trade grew by 7.8 percent in August to $15.8 billion.

“In order to sustain the country’s trade growth, targeted interventions that aim to mitigate vulnerabilities, increase production capacities, and level up coping strategies to global market trends and shocks must be put in place,” Edillon said in a statement.

Exports continued its third month of gradual recovery at 3.1 percent from a nearly flat performance of 0.3 percent the previous month due to electronic products, mineral products, and fruits and vegetables.

Edillon said key strategies to improve the overall climate for export development are identified in the Philippine Export Development Plan 2018-2022.

These include removing unnecessary regulatory impediments, raising productivity and competitiveness of Philippine enterprises, upgrading export quality and standards, improving access to trade finance, and enhancing export sectors’ innovative capacities.

“The immediate implementation of the Ease of Doing Business Act will also be vital in attracting competitive firms to enter the country’s exporting industry,” Edillon said.

“The approval of the 11th Foreign Investment Negative List should further ease restriction on foreign investments and prop-up domestic economic activity,” she added.

Meanwhile, growth of imports slowed to 11.0 percent from 31.6 percent in July 2018.

Imports growth softened because of weaker purchases of capital goods, raw materials & intermediate goods, and consumer goods.

Edillon said the total import bill is expected to accelerate further in the coming months driven by capital goods to support the Build, Build, Build program. Payments for oil will also be higher as international prices push upwards the costs of importation.

Meanwhile, the Department of Trade and Industry (DTI) reported that total exports of goods and services grew by 4.1% year-on-year (yoy) to US$44.2 billion in the first half of 2018 compared to US$42.5 billion in the first half of 2017. The first-half export growth was driven by strong performance of services exports, which grew by 13% yoy

There was also a positive recovery noted on merchandise exports, posting a 2.8% increase in June 2018 compared to June last year.

“Despite the higher base from last year, we are looking at an upward shift in the export growth rate. To sustain the momentum, DTI continues to drive more investments to build a stronger export manufacturing base that will cater to the domestic market and at the same time create surplus for export to other countries,” said DTI Secretary Ramon Lopez.

Philippine (PH) exports have been largely concentrated in electronic products, machinery and transport equipment, and other electronics. However, DTI is also looking at the growing non-electronic sectors, which has grown from 38% of total exports in 2007 to 47% in 2017.

DTI also explained that the growing import figures support the growing manufacturing industry. For the past eight years, manufacturing posted a 7.6% growth while imports were largely contributed by capital goods, equipment, intermediate goods, and raw materials.