Imports growth slows, deficit widens
Philippine imports in June slowed from May this year and from June 2015, but the country’s trade deficit widened further as inbound shipments continued to outpace exports during the month in review, data from the government showed on Thursday.
Inbound shipments in June grew 15.4 percent from a year earlier to $6.85 billion, surpassing exports valued at $4.75 billion, data from the Philippine Statistics Authority (PSA) showed.
With this, the PSA said: “The balance of trade in goods (BOT-G) for the Philippines in June 2016 registered a deficit of $2.098 billion, higher than the $576.80 million trade deficit in the same month last year.”
The 15.4 percent rate of growth in imports in June marks a sharp slowdown from the 39.3 percent increase in May and from 23 percent in the year-earlier period.
Cumulative imports for the first half of 2016 rose 17.7 percent to $38.74 billion from $32.91 billion during the same period a year ago, bringing the year-to-date trade deficit to $11.91 billion, tripling the $3.91 billion gap recorded at end-June 2015.
“Exports were down 7.5 percent through June . . . These have produced a large negative swing in the trade deficit,” said Joey Cuyegkeng, ING Bank Manila senior economist.
Based on the present trend, Cuyegkeng forecasts a $15 to $16 billion negative swing in the customs-based trade deficit this year.
Socioeconomic Planning Secretary Ernesto Pernia also said that the country would continue to experience trade deficit in the coming months.
“It is usually the case in most developing countries. A trade deficit is something normal for developing countries because there is a need to import a lot of things not just consumer goods but also capital goods,” he said.
Going forward, Pernia said the country will post negative net exports this year and the next but, he added, it would not drag economic growth if it was offset by the other demand components of the economy such as consumption, investment and government spending.
“Government spending will definitely be strong and investment also. Given that our imports of capital growth has been very high then we can expect that investment component of GDP [gross domestic product]will be strong,” he added.
In addition, he said modernization of seaports and airports to ease the flow of goods into and within the country, and a comprehensive tax reform package will also boost consumer spending and investments.
Electronic products, the top export item in June, registered a 15.8 percent decline from the year earlier to total $1.69 billion and accounted for a 24.8 percent share of the month’s total imports.
Among other leading imports were minerals, fuels, lubricants and related materials (down 5.1 percent to $767.97 million), transport equipment (up 50.7 percent to $713.99 million), industrial machinery and equipment (up 57.8 percent to $478.19 million), and iron and steel (up 67 percent to $354.01 million).
“This performance shows the strength of domestic demand in the country particularly in consumption and investment, as reflected by the latest real GDP growth of 7.0 percent in the second quarter,” Pernia, who is also the National Economic and Development Authority (NEDA) director general, said.
Citing PSA data, the NEDA said the Philippines continued to outperform Vietnam (up 1.9 percent), Malaysia (down 1.0 percent), Indonesia (down 6.8 percent), India (down 7.3 percent), China ( down 8.4 percent), and Thailand (down 10.1 percent).
Imports of capital, consumer goods
The NEDA also reported that inward shipment of capital goods grew by 64.6 percent in June 2016, amounting to $2.2 billion.
“This bodes well for the economy as it signals robust investment activity in industry and services moving forward,” Pernia said.
Likewise, imports of consumer goods increased by 32.6 percent to $1.2 billion in June 2016. Higher spending was observed for both durable goods (up 59.8 percent), particularly passenger cars and motorized cycles, and non-durable goods (6.9 percent) such as food and live animals.
“The trend of imports growth is expected to remain positive, albeit at a slightly lower pace due to a relatively weak outlook for electronics exports, which will affect the importation of electrical equipment. However, strong construction activity will continue to boost spending on durable equipment and capital goods,” said Pernia.
China is a major source of imports with a share of 18.8 percent of the total imports. It was followed by Japan, Thailand, United States, Taiwan, Singapore, South Korea, Indonesia, Malaysia, and Hong Kong.