Exports, imports still sliding

External trade shrank 21% year-on-year to $12.3B in August

The value of goods exported and imported by the Philippines in August fell by more than a fifth due to still weak global demand caused by the COVID-19 pandemic.

The latest preliminary external trade data released by the Philippine Statistics Authority (PSA) on Friday showed that merchandise exports declined by 18.6 percent year-on-year to $5.13 billion last August, which was also lower than the $5.68 billion worth of Philippine-made products sold abroad in July.

Imports dropped by a faster 22.6 percent year-on-year to $7.2 billion, also exceeded by July’s $7.54 billion.

As such, two-way trade slid 21 percent year-on-year to $12.33 billion in August while the balance of trade-in-goods remained at a deficit but at a narrower $2.08 billion compared to $3 billion a year ago due to the bigger drop in imported items.

In a note to clients, ING Bank Philippines senior economist Nicholas Antonio Mapa attributed the double-digit contraction in both exports and imports that month to “poor external demand and a sputtering domestic economy.”

“The pullback in export performance was tagged to the substantial dropoff in its mainstay semiconductor sector, with exports of electronics products down 20.1 percent. Meanwhile, imports dropped substantially with double-digit contractions recorded for capital equipment (down 27.6 percent), consumer goods (down 24.6 percent) and fuel (down 47.7 percent),” Mapa noted.

Mapa said the slump in imports, which narrowed the trade deficit and reverted the current account to a surplus, would support the peso’s strength in the near term.

While the worst was over for the Philippine economy, UK-based Oxford Economics last Tuesday said recovery from the COVID-19-induced recession remained sluggish due to the slow rebound in both domestic and external demand.

Citing Oxford Economics’ growth tracker for emerging Asian markets, senior economist Stefan Angrick said “activity reached its low point in April, thanks to a collapse in manufacturing and household spending and sharp declines in exports and imports” amid the then very stringent COVID-19 lockdown, which pulled gross domestic product down by a record 16.5 percent year-on-year during the second quarter.

“Despite solid gains in May and June, our tracker shows that momentum stagnated in July as capacity utilization and imports struggled to gain pace, reflecting a disappointingly sluggish initial recovery in domestic demand,” Angrick said in a report titled “EM Asia growth trackers point to slow, uneven recovery.”