The country’s trade deficit widened to $3.58 billion in August as merchandise imports jumped 30.8 percent to $10.04 billion from a year ago and exports grew at a slower rate of 17.6 percent to $6.47 billion, data from the Philippine Statistics Authority show.
ING Bank Manila senior economist Nicholas Mapa said with the widening trade deficit, concerns about the current account deficit would likely surface, as the so-called “twin deficits” threatened the pace of recovery.
“With the current account balance swinging back into the red and the similar reversal in flows on the financial account, we could see the balance of payments edge closer to the red resulting in a weaker currency,” he said.
Mapa said the peso was also expected to face a depreciation bias to close out the year especially with sentiment shifting back to developed market currencies, “whose countries have fared much better in terms of pandemic response and as a result have enjoyed a quicker rebound for their economies.”
The growth in imports, however, reflected improved supply and demand conditions as the economy gradually recovered from the COVID-induced recession last year.
The higher imports in August was due to the increase in top 10 major commodity groups, led by mineral fuels, lubricants and related materials with 116.2-percent increase, followed by medicinal and pharmaceutical products (73.2 percent) and iron and steel (55.6 percent).
Data showed that from January to August, imports reached $74.18 billion, up by 31.1 percent from $56.59 billion in the same period last year.
Export sales reached $6.47 billion in August, as the top 10 major commodity groups recorded annual increases led by cathodes and sections of cathodes, of refined copper (162.5 percent), electronic equipment and parts (41.8 percent) and coconut oil (31.8 percent).
The cumulative export earnings in the first eight months amounted to $48.93 billion, up by 19.6 percent from the a year earlier.
Mapa said both inbound and outbound shipments showed double-digit gains given the low base from last year.
“Exports sustained another month of robust expansion, driven in part by strong global demand for semiconductor chips and electronics with the mainstay sector up 16.5 percent for the month and 17.1 percent for the year. All other exports are now 23.1 percent higher year-to-date although base effects may wane in the months to come,” Mapa said.
Mapa said signs of a construction rebound surfaced as imports of iron, steel and other metals grew by double digits.
“Lastly, fuel imports surged 116.2 percent as energy prices rose 61 percent year on year due to global supply chain bottlenecks. Pricier energy padded the overall import bill by roughly $650 million with actual fuel imports rising only modestly,” he said.
“Current trends in the trade data feature resurgent import flows as the economy attempts to gradually exit from the current recession. Still at least a year away from returning to pre-COVID levels, even the pace of expansion remains much to be desired given the stop-go nature of partial lockdown measures and relatively low vaccination rates. The silver lining is that imports flows signal at least a modest pickup in demand activity,” he said.