The country’s trade deficit in January dropped 10.7 percent to $3.50 billion from $3.92 billion a year ago, as exports growth outpaced that of imports, the Philippine Statistics Authority said Tuesday.
Data showed the country’s total external trade in goods in January amounted to $15.08 billion, 4.1 percent higher than $14.48 billion in the same month of the previous year.
The trade consisted of $5.79 billion (38.4 percent) in exported goods and $9.29 billion (61.6 percent) in imported goods.
The country’s total export sales in January stood at $5.79 billion, up 9.7 percent from $5.28 billion on year.
The PSA attributed the higher exports to the increases in sales to seven of the top 10 major export commodities, namely other mineral products (68.3 percent); gold (46.0 percent); electronic products (15.8 percent); cathodes and sections of cathodes, of refined copper (10.1 percent); other manufactured goods (7.4 percent); ignition wiring set and other wiring sets used in vehicles, aircrafts and ships (1.3 percent); and chemicals (1.2 percent).
Total imports in January rose 1 percent to $9.29 billion from $9.20 billion a year ago. The improvement was due to the increases of seven of the top 10 major import commodities, namely mineral fuels, lubricants and related materials (20.2 percent); miscellaneous manufactured articles (11.6 percent); other food and live animals (11.0 percent); iron and steel (7.2 percent); transport equipment (5.0 percent); industrial machinery and equipment (2.9 percent); and telecommunication equipment and electrical machinery (1.7 percent).
ING Bank Manila senior economists Nicholas Mapa said the surprise exports growth was not likely to last much longer and that the January trade numbers did not capture the impact of the coronavirus disease, or COVID-19.
“… Philippine exports continued to grow in January, showing a 9.7 percent [increase] after the 21.7-percent jump posted in December 2019 likely driven by orders related to the much-anticipated phase one US-China trade deal,” Mapa said.
“… In the coming months, we may expect a drop in demand for electronic components as the global supply chain remains impaired by work stoppages and depressed demand due to COVID-19. A projected slowdown or contraction in electronics exports will likely drag on the entire export sector in 2020,” he said.
Mapa added that the narrowing trade deficit might be another reason why the peso has managed to outpace regional peers, now under pressure on COVID-19 concerns.
“In the coming months however, we can expect a downtrend for both exports and imports as global trade will likely pullback on supply chain disruptions linked to the virus outbreak. Imports from China,
despite posting a decent rebound in January will likely reverse to contraction with the bulk of these imports being raw materials for construction or re-export,” he said.
He said this development might be crucial for the government and its ambitious infrastructure plans as iron and steel were sourced from China which could lead to delays in the government’s construction efforts.
“… In the coming months, we can expect both exports and imports to face weakness although the overall trade balance should remain sizeable at roughly $3.3 billion which could translate to currency account deficits with the peso’s fate tied more to financial market flows, which may remain positive in 2020 given projections for further monetary easing from global central banks,” Mapa concluded.
In 2019, trade deficit narrowed by 15 percent to $37.049 billion from $43.533 billion in 2018 on stronger exports numbers.
Exports slightly improved by 1.47 percent to $70.32 billion from $69.3 billion in 2018. Imports, meanwhile, dropped 4.8 percent to $107.37 billion from $112.84 billion a year ago.