By Chino S. Leyco
The Philippines’ trade gap increased by half last year as imports continued to outpace country’s exports, data from the Philippine Statistics Authority (PSA) showed yesterday.
Based on the latest PSA report, the trade deficit further rise by 51 percent last year to $41.44 billion from $27.38 billion in the previous year after import receipts amounted to $108.93 billion, while exports reached only P67.49 billion.
The full-year 2018 increase in trade deficit was significantly higher compared with the previous year’s of only 2.5 percent.
In 2018, the country’s imports increased by 13.4 percent from $96.09 billion in 2017 amid higher arrivals of capital and consumer goods, while exports dived by 1.8 percent year-on-year from $68.71 billion in the previous year.
In a statement, Socioeconomic Planning Secretary Ernesto M. Pernia said yesterday that policy uncertainty remains a threat to global trade, investment, and output, especially as US-China trade tensions continue.
To mitigate external risk, Pernia said the national government should continue to work on legislative reforms that will open up sectors for foreign investment.
The government’s chief economist added that, given the widening current account deficit due to the trade gap, the proposed amendments to the Foreign Investment, Retail Trade, and Public Services Acts must be pursued.
“We should encourage foreign firms to transfer their manufacturing facilities in the Philippines and to take advantage of the growing domestic market,” Pernia said.
The full implementation of the Ease of Doing Business and Efficient Government Service Act of 2018 is also being pushed to eliminate bureaucratic and regulatory barriers that raise the cost of doing business in the country, he added.
Meanwhile, The country’s trade deficit in December dropped 5.5 percent to $3.75 billion, which was a three-month low, after imports tumbled for the first time in a year, dented by double-digit drop in shipments of capital and consumer goods.
Imports of capital goods such as transport equipment, telecommunications equipment and electrical machinery plunged 33.3 percent and 5.5 percent, respectively.
Nicholas Mapa, ING Bank Manila economist, however, expects a rebound on imports of consumer and capital goods in the coming months as the government pushes ahead with its infrastructure program.
“I still expect trade gap to remain relatively wide, $3.25 billion to $3.5 billion for every month. You are still going to import capital machinery. Your raw materials, your construction materials for ‘Build, Build, Build’,” Mapa said.
The drop in consumer imports was not a surprise as consumers front-loaded car purchases ahead of the implementation of higher taxes on certain types of vehicles last year, he added.
“It is quite apparent that the downward trend in exports was brought about by softening global demand induced by global growth slowdown as well as increased uncertainty amid escalating US-China trade tensions. Electronics supply chain in the region was adversely affected as lower orders from one country can lead to lower orders in other supplier countries,” DTI Secretary Ramon M. lopez said.
He noted that electronics sector, which used to average over 5% growth has now settled at 2.8% growth.
This was also evident in the reduction in manufacturing PMIs of these economies during the month, but such PMI levels still showed Philippines as best performer in Asean.
Non- electronics exports were still affected by production capacity issues. Thus the need to ramp-up capacities in manufacturing and address other supply constricting factors.
For instance, he said, wood manufactures exports were drastically affected by the fire that gutted the biggest exporter in the industry. The company has just rebuilt its plant and is expected to resume it exports supply moving forward.
Chemical products are mainly affected by ports and logistics efficiency issues in their import-export operations, as well as the police security and control procedures that affect chemicals trade.
Coconut, mango and other agricultural inputs are affected by supply and prices issues.
Processed food exports are still affected by high cost and supply issues in sugar inputs.