Philippine National Bank, the fifth-largest lender in terms of assets, said economic growth in the third quarter would likely stay below 6 percent, given the anemic demand for imports during the period.
PNB said in a report Monday that the lethargic re-stocking among local producers coupled with easing capex-related expenditures for much of the third quarter hindered local demand-driven imports.
“On this note, we sense broad-based, mediocre demand remains entrenched in 3Q19 that’s likely to mirror 3Q GDP growth of less than 6 percent. This less-than-ideal demand condition through weaker imports curbed the risk of a deteriorating trade shortfall,” PNB said.
Data from the Philippine Statistics Authority showed that the country’s trade-in-goods deficit narrowed by 33 percent in August to $2.4 billion from $3.6-billion a year ago, as exports rose 0.6 percent while imports fell 12 percent.
This brought the trade deficit in the first eight months to $24.7 billion, down 8 percent from $26.8 billion a year ago.
Local demand-driven imports succumbed to weakness in August as reflected by lower purchases of capital goods (down 9.8 percent year-on-year), fuel/lubricants (-11.9 percent) and consumer goods (-0.3 percent).
Raw material imports posted the heftiest decline (-18.7 percent), led by manufactured goods (-22.6 percent) such as iron and steel imports which suggested de-stocking in construction-related and in other materials.
Lackluster imports of materials/accessories for the manufacture of electrical equipment (-15.9 percent) presumably for exports, further weakened total imports in August. The latest import update was the fifth straight monthly decline.
ING Bank Manila senior economist Nicholas Mapa earlier said capital goods, raw materials, fuel, and consumer imports all contracted as elevated borrowing costs and the budget delay knocked down capital formation.
Mapa said the weak imports signaled continued sluggishness in gross domestic product growth in the third quarter. GDP grew 5.5 percent in the first half, below the 6 percent to 7 percent growth target for the year.