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OCBC sees wider Philippine trade deficit as exports slow and imports surge
OCBC sees wider Philippine trade deficit as exports slow and imports surge
The Philippines’ trade deficit could widen further in the coming months as export growth loses momentum while imports continue to surge, increasing the economy’s vulnerability to external shocks, Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) warned.
“Looking ahead, the divergence between slowing export growth and robust import expansion may continue to pressure the trade balance in the near term, potentially leading to a wider trade deficit and increased vulnerability to external economic shocks,” OCBC said in a June 2 report.
The warning came after the latest Philippine Statistics Authority (PSA) data showed merchandise exports grew by only 6.3 percent year-on-year in April, easing sharply from the upwardly revised 20.8-percent growth recorded last March.
Meanwhile, imports expanded by 22.4 percent, accelerating from the revised 17-percent growth in March.
As a result, the country’s trade deficit widened to $6 billion last April from $5 billion a month ago.
OCBC said the slowdown in exports was driven primarily by weaker shipments of manufactured goods, which shrank by four percent year-on-year after expanding by 22 percent last March.
The decline marked the first year-on-year contraction in manufactured exports after 15 straight months of growth.
The weakness in manufacturing exports also offset strong gains in other sectors.
Exports of agro-based products rebounded by 41.2 percent in April from a 5.1-percent decline in March, while mineral products grew by 62.9 percent, faster than the 40.7-percent expansion recorded during the previous month.
The report also noted that export growth to the United States (US)—the top destination of Philippine-made goods—remained broadly stable at 25.7 percent, compared with 24.4 percent last March.
OCBC's assessment echoed concerns raised by British banking giant Barclays, which said in a May 29 report that the Philippines’ merchandise trade deficit “likely came under further pressure in April on the back of the Middle East conflict and surging global commodity prices.”
Higher commodity prices have boosted the country's import bill, particularly for energy products, even as export demand remains uneven across sectors amid a prolonged conflict in the Middle East.