Trade deficit worsens as exports fall flat

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Metro Manila (CNN Philippines, September 11) — The balance of trade remains in the negative in July, and an analyst said this is due in part to a weaker peso against the dollar.

According to the latest data from the Philippine Statistics Authority (PSA), the trade deficit in July widens to $3.55 billion, 171 percent more than the $1.31 billion trade deficit last year.

This brings the year-to-date trade gap to a total of $22.5 billion, a hefty 72 percent jump from $13.1 billion in the same period last year.

This was the result of a disproportionate hike in imports compared to the flat export growth for the month, aggravated by the peso's continued depreciation.

Exports grew by a mere 0.3 percent in July at $5.85 billion from $5.83 billion in the same month last year.

"This was due to the increases posted by six out of the top 10 commodities for the month led by exports of miscellaneous manufactured articles (80.2%); bananas (fresh) (60.3%); electronic equipment and parts (43.3%); other mineral products (33.6%); metal components (8.7%); and electronic products (5.2%)," the PSA said in a statement.

The United States was the top destination of Philippine export products, at 16.6 percent. It is followed by Hong Kong, Japan, China, Singapore, Thailand, Germany, Taiwan, Malaysia and South Korea respectively.

However, imports continue to grossly outweigh exports by almost double the amount, at $9.40 billion in July. This is 31.6 percent more than what the country imported in the same month last year, at $7.14 billion. The PSA added that the Philippines has imported more of the nine of the top ten products that it gets from other nations.

"These were the following: iron and steel (135.5%); transport equipment (61.1%); miscellaneous manufactured articles (45.4%); electronic products (43.2%); telecommunication equipment and electrical machinery (37.9%); mineral fuels, lubricants and related materials (35.8%); cereals and cereal preparations (35.7%); plastics in primary and non-primary forms (29.5%); and industrial machinery and equipment (17.9%)," the PSA pointed out.

China is the major source of imports, at 19.8 percent. The PSA noted that around $1.86 billion imports were purchased from China in July, 51.2 percent more than the $1.23 billion imports in the same month last year.

A 50.7 percent increase of imports from South Korea was also noted. In July, the Philippines bought more than $936.49 million worth of products, which made for 10 percent of that month's imports.

Rounding up the top ten import sources are Japan, Thailand, U.S., Indonesia, Singapore, Taiwan, Malaysia and Hong Kong.

International think tank ING Think said that July's trade deficit was "worse than expected."

It added that this is the third worst report for the Philippines, with the preceding two periods also falling within the Duterte administration.

"The worst trade deficit of $3.97 billion was posted in December 2017 while the second worst was in May 2018 (at -$3.69 billion)," said ING Think in a statement.

The depreciation of the peso was also a factor in the yawning trade gap.

"The weak Philippine peso contributed to the weak trade performance. PHP depreciated by 5.5% in July, by an average 4.3% for the 7-month period and by 6% for the year to the end of July," ING Think said.

ING noted that recent actions from the Bangko Sentral ng Pilipinas, which includes interest rate hikes and the reimplementation of the Currency Risk Protection Program, could help strengthen the peso and prevent the further widening of the trade gap.

The peso closed today at ₱53.94 versus the dollar, a fresh near-thirteen year low, and inching closer to the ₱53.98 close on December 7, 2005.