Trade gap more than doubles in July

The continued surge in imports coupled by sluggish exports drove the country’s trade balance to a wider deficit in July, the Philippine Statistics Authority (PSA) reported yesterday.

In its latest trade data, the PSA noted that the trade deficit more than doubled to $3.55 billion in July, fueled by the 31.6 percent spike in imports while exports were almost flat with a mere 0.3 percent growth.

Total exports reached $5.85 billion in July from $5.83 billion in July 2017.

In contrast, total imports jumped to $9.40 billion from $7.14 billion in the same month last year.

This resulted in a 171 percent increase in the trade deficit to $3.55 billion in July from the $1.31 billion gap in July 2017.

Merchandise imports grew by nearly a third, driven by import of capital goods, raw materials and intermediate goods, which all posted hefty growth, indicating continuing investment for higher productivity.

The PSA attributed the significant growth in imports to increases in nine out of the top 10 major import commodities

particularly iron and steel (135.5 percent); transport equipment (61.1 percent); miscellaneous manufactured articles (45.4 percent); electronic products (43.2 percent); telecommunication equipment and electrical machinery (37.9 percent); mineral fuels, lubricants and related materials (35.8 percent); cereals and cereal preparations (35.7 percent); plastics in primary and non-primary forms (29.5 percent); and industrial machinery and equipment (17.9 percent).

In contrast, the slight growth in exports was due to the increases posted by six out of the top 10 commodities for the month led by exports of miscellaneous manufactured articles (80.2 percent); bananas (fresh) (60.3 percent); electronic equipment and parts (43.3 percent); other mineral products (33.6 percent); metal components (8.7 percent); and electronic products (5.2 percent).

“As the global trade situation becomes less encouraging, improving the overall climate for export development becomes all the more indispensable. Thus, the government needs to fast-track the crafting of the Ease of Doing Business Act’s implementing rules and regulations,” Socioeconomic Planning and National Economic and Development Authority (NEDA) chief Ernesto Pernia said.

Despite the continued growth of trade, the World Trade Outlook Indicator points toward a continued slowdown in trade in the third quarter. The slowdown in activity is attributed to rising trade barriers, moderating growth in China, higher energy prices, and elevated policy uncertainty.

Moreover, the bilateral trade war between the US and China has resulted in a growing coverage of tariff levies throughout the year, with both countries already imposing additional 25 percent tariff on $50 billion worth of goods each.

“Trade war fears have weighed on business sentiment, and we now see softer global activity. With a resolution unlikely in the short term, the dispute is expected to dampen growth in both economies and drag down growth in the wider global economy,” Pernia said.

Pernia said there is a need to promote forward and backward linkages to boost the country’s exports, particularly through projects such as the Agribusiness Support for Promotion and Investment in Regional Expositions or ASPIRE, which integrates marketing development support services to farmers, fisherfolk, and MSMEs, and linking exporters to sources of export financing.

He added that the high cost of domestic and international shipping and cargo handling also needs to be addressed.