Trade gap hits $52.42B

Drop in goods imports, exports exceeds forecasts

THE Philippines posted a $52.42-billion trade deficit last year, Philippine Statistics Authority data showed on Friday, with both imports and exports having fallen amid continued headwinds.

The result, which improved from 2022’s $57.65 billion, came as the merchandise trade gap narrowed to $4.01 billion in December last year from November’s $4.73 billion and the year-earlier $4.51 billion. Full-year merchandise trade totaled $199.47 billion with exports having hit $73.52 billion,

7.6 percent lower compared to 2022’s $79.57 billion, and imports also down 8.2 percent to $125.95 billion from $137.22 billion.

The declines were worse than the 4.0-percent export and 3.0-percent import contractions forecast by the interagency Development Budget Coordination Committee (DBCC) just before 2023 ended.

In December alone, total trade in goods contracted by 3.5 percent to $15.57 billion from $16.13 billion a year earlier, with imports having hit $9.79 billion and exports at $5.78 billion.

Exports posted a 0.5-percent downtick year on year, a marked improvement from November’s -13.0 percent and the previous year’s -7.5 percent.

Imports, meanwhile, fell by 5.1 percent, reversing from the previous month’s 1.3-percent gain but improving from year-earlier -9.4 percent.

Imports comprised 62.9 percent of total external trade in December and exports accounted for the rest.

The country’s top export — electronics — increased to $3.38 billion in December from $3.29 billion a year earlier. It accounted for 58.4 percent of total outbound shipments.

Hong Kong was the biggest buyer of Philippine-made goods during the month, having purchased a total of $951.14 million or 16.5 percent of total export sales.

Rounding out the top five were the United States ($904.78 million or 15.7 percent), Japan ($703.98 million or 12.182 percent), China ($703.89 million or 12.180 percent) and South Korea ($325.53 million or 5.6 percent).

Electronic products were also the Philippines’ biggest import for the month, at $2.09 billion or 21.4 percent of the total. This was lower

than the year-earlier $2.42 billion.

China was the country’s biggest supplier, providing $2.28 billion worth or 23.2 percent of total imports.

It was followed by Japan ($825.23 million or 8.43 percent), Indonesia ($823.18 million or 8.41 percent), the US ($748.89 million or 7.6 percent) and Thailand ($649.94 million or 6.6 percent).

Sought for comment, China Banking Corp. chief economist Domini Velasquez said the turnaround in export growth for electronics and agricultural products had raised hopes for 2024.

“Outlooks for the sectors are positive, particularly in the second half of the year. Imports remained muted due to low oil prices, but we have yet to see a turn in lukewarm demand for capital goods,” she added.

“In 2024, we expect the trade deficit to narrow further, driven by a modest recovery in the semiconductor industry.”

However, Velasquez noted that global trade was currently at significant risk due to attacks on commercial vessels in the Red Sea.

While the impact on the domestic economy is minimal at the moment, she said a prolonged disruption could result in shipment delays and higher freight and insurance costs.

ING Manila Bank senior economist Nicholas Antonio Mapa, meanwhile, said the trade gap having exceeded $4 billion indicated ongoing current account challenges for the Philippines.

“With the current account likely still in deficit, we can expect the PHP (Philippine peso) to remain vulnerable to bouts of depreciation,” he added.

“Meanwhile, during episodes where Asian FX (foreign exchange) are poised to rally, we expect the PHP to lag peers during bouts of appreciation.”

The DBCC is targeting an exports and imports rebound this year via growth of 5.0-percent and 7.0-percent growth, respectively.