Nomura sees weak exports, growth in imports

Nomura Securities Co. Ltd. sees sustained growth in imports but expects exports to remain weak this year amid soft global demand.

Euben Paracuelles, economist at Nomura, said in its latest insight titled “Philippines: stable trade deficit in July” that imports would continue to grow despite a 1.7 percent drop in July.

He pointed out the contraction in July was due to a post-election normalization of demand.

“Notwithstanding monthly fluctuations, we still expect import growth to remain strong, underpinned by a solid domestic demand outlook, particularly in light of the Duterte administration’s focus on boosting infrastructure spending,” he said.

The Duterte administration raised the budget deficit ceiling to three percent of gross domestic product (GDP) instead of two percent of GDP under the leadership of former president Benigno Aquino III.

On the other hand, exports fell by a larger-than-expected 13 percent in July after contracting 11.4 percent in June, led by weaker exports of manufactured goods and petroleum products.

“We still expect exports to remain weak over the remainder of the year given the external backdrop and as electronics demand is likely to soften,” Paracuelles said.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade in goods deficit widened to $14 billion from January to July from $11.9 billion in the same period last year.

Socioeconomic Planning Secretary Ernesto Pernia said the country’s trade deficit is expected “to be there for some time.”

“Imports have been growing faster than exports so we need to watch out. We don’t want the trade gap to explode,” he said.

Pernia, who is also director general of the National Economic and Development Authority (NEDA), believes exporters should continue to expand presence in non-traditional markets.

According to him, this would reduce the country’s dependency on traditional markets such as Japan, China, Hong Kong and the US.