The trade deficit narrowed by a third to $2.4 billion in August from a shortfall of $3.6 billion a year ago as exports rose 0.6 percent and imports dropped 12 percent, the Philippine Statistics Authority said Thursday.
This brought the trade deficit in the first eight months to $24.7 billion, down 8 percent from $26.8 billion a year ago.
Data showed that merchandise exports increased to $6.25 billion in August from $6.22 billion a year earlier while imports shrank to $8.66 billion from $9.81 billion.
Economic Planning Secretary Ernesto Pernia said the government should redouble efforts to support export products where the country has comparative advantage so that the trade sector can recover and pick up more steam.
“We must continue to initiate programs that provide comprehensive packages of support for products with comparative advantages, including related industries, to facilitate expansion in the international market,” Pernia said.
“As subdued investments in emerging markets, coupled with the persisting trade tensions, continue to hamper global expansion, implementation of timely reforms will vastly improve the country’s resilience to external shocks,” he said.
ING Bank Manila senior economist Nicholas Mapa said the trade gap pulled back as imports fell more than expected with almost all sectors in the red.
“Capital goods, raw materials, fuel and consumer imports all contracted as elevated borrowing costs and the budget delay knocked down capital formation. In particular, all types of capital imports contracted while raw materials related to construction fell as the impact of the BSP’s aggressive 2018 rate hike and the budget delay continued to surface,” Mapa said in a comment.
“Outbound shipments kept the streak of growth alive [five months] amidst the trade war as the mainstay electronics subsector showed resilience despite the tech slowdown. Exports to the US were up again, growing despite the peso’s recent strength,” Mapa said.
Mapa said the weak imports signaled the continued sluggishness in gross domestic product growth in the third quarter. GDP grew 5.5 percent in the first half, below the growth target of 6 percent to 7 percent for the year.
“With the import numbers showing a sustained pullback in investment machinery, 3Q GDP may see capital formation struggle anew. Sub-par growth will help convince the BSP to continue walking back 2018’s rate hike cycle,” Mapa said.
