Exports tumbled 50.8 percent in April from a year ago, the biggest decline in a decade, as the enhanced community quarantine in Luzon restricted the movement of people and goods to contain the coronavirus pandemic.
The Philippine Statistics Authority said merchandise exports decreased 50.8 percent in April to $2.78 billion from $5.65 billion in the same month last year.
“This contraction was the highest recorded annual decrease in export sales since January 2009. In the previous month, the annual decline was slower at 24.7 percent while in April 2019, exports grew at an annual rate of 3.1 percent,” the PSA said.
It said manufactured goods posted the sharpest decline of 64 percent, followed by machinery and transport equipment with a drop of 63.6 percent and coconut oil which sank 55.5 percent.
“For faster trade growth recovery, the government needs to intensify its efforts by prioritizing structural and logistics reforms that will serve as the backbone of ongoing efforts to improve the business environment and create development opportunities,” said acting Economic Planning Secretary Karl Kendrick Chua.
Meanwhile, merchandise imports plunged 65.3 percent in April to $3.28 billion, also the highest annual decline since April 2009. “In the previous month, the decline was slower at 26.2 percent while in April 2019, imports grew by 2.9 percent annually,” the PSA said.
It said the sharp drop in April shipments was due to the decreases in transport equipment, with -89.8 percent; mineral fuels, lubricants and related materials, -87.4 percent; and miscellaneous manufactured articles, -75.5 percent.
Total external trade in goods amounted to $6.07 billion in April, down 59.8 percent from a year ago. The drop was faster than the 29-percent decline in total shipments in March.
ING Bank Manila senior economist Nicholas Mapa said both imports and exports plunged in April after the government placed Luzon under lockdown to prevent the spread of the disease.
“Checkpoints and curfews were in place while businesses were closed which likely hampered the once free flow of goods and services both in and out of the country,” Mapa said.
The PSA said that as imports declined faster than exports, the trade deficit shrank 86.9 percent in April to $499.2 million from $3.8-billion deficit in the same month last year.
Data showed that April figures brought the trade deficit in the first four months to $8.027 billion, down by 43 percent from $14.13-billion deficit a year ago.
Mapa said imports were expected to improve in the coming months after the “Build, Build, Build” projects resumed construction.
“The government has pointed to the resumption of its ‘Build, Build, Build’ infrastructure program as a means to combat the fallout from COVID-19 pandemic, and we expect import growth to return in the coming months,” Mapa said.
He said inbound shipments for construction materials, fuel and capital machinery used for construction would likely bloat the import bill at a time where export prospects looked bleak given the projected recessions in major trading partners like the US, Japan and China.
“The widening of the trade gap coupled with the absence of usual dollar inflows from remittances could translate to a swelling of the current account deficit which could spark renewed depreciation pressure on the peso in the second half,” Mapa said.
Chua said structural reforms are crucial to the country’s efforts to promote itself as a complementary host, particularly in making the country an attractive investment destination. In particular, the country needs to attract investments that can bring in the technology that we need to thrive under the new normal.
“We now need to pursue legislation that will facilitate better foreign investments in some sectors such as the proposed amendments to the Public Service Act, the Foreign Investment Act and the Retail Trade Liberalization Act,” Chua said.
Logistics reforms include rationalizing the freight system, establishing strategic warehousing, and cold chain system to ensure that production will not be derailed.
Businesses wanting to expand will be provided incentives that are targeted, performance-based, time bound and transparent through the Corporate Recovery and Tax Incentives for Enterprises Act, said Chua.
“While the government is laying the groundwork with improved infrastructure, logistics, regulations and reforms, the business sector also needs to recognize the change in consumer preference. This is now an opportune time for them to reorient and re-design their production and supplies network accordingly,” he said.
He also encouraged enterprises to take advantage of digital technology in streamlining its business processes and resort to online transactions which will become the new standard for engaging with clients, buyers and suppliers.
