Trade deficit seen to hit record $35 B this year

Dutch financial giant ING Bank said the trade deficit of the Philippines may widen to a record $35 billion this year amid sustained high imports and soft export growth.

Joey Cuyegkeng, senior economist at ING Bank Manila, said the projected shortfall this year is 17.4 percent wider than $29.8 billion trade deficit recorded in 2017.

“The trade deficit is likely to worsen to $35 billion in 2018 on 11 percent import growth and an eight percent export increase,” he said.

Latest data from the Philippine Statistics Authority (PSA) showed the country booked a 19.5 percent increase in trade

deficit to a record $29.8 billion last year from $24.93 billion in 2016.

Statistics showed exports rose 9.5 percent to $62.9 billion from $56.23 billion while imports grew faster at 10.2 percent to $92.7 billion from P81.16 billion.

Cuyegkeng said exports are likely to moderate after the 9.5 percent yearon-year rebound in 2017, largely due to favorable base effects.

He said the exports net of electronics drag overall export performance in December and in 2017.

“The export sector remains shallow and relies heavily on electronics exports which account for almost 50 percent of total exports. Imports are likely to remain strong in 2018,” Cuyegkeng said.

He added domestic demand driven economic growth would continue to see strong imports of consumer goods, capital equipment and oil.

The economist explained the higher demand for dollar due to strong imports would continue to put more pressure on the peso.

“The worsening trade balance will likely lead to another year of underperformance for the Philippine peso,” Cuyegkeng said.