Trade deficit widens as exports shrink

The country’s trade deficit widened to $5.7 billion in January as exports declined and imports increased year-over-year, the Philippine Statistics Authority (PSA) said Tuesday.

Merchandise exports for the month were $5.23 billion, down 13.5% from last year, while imports rose 3.9% to $10.97 billion, PSA data showed.

In other words, about two-thirds, or 67.7 percent, of total foreign trade in January came from imports, with the rest being exports of Philippine-made goods.

Double-digit drop in exports

Electronic goods, which account for more than half of the country’s exports, fell 19.2 percent to $2.83 billion.

Five other major product groups saw double-digit declines: coconut oil (-39.1%), refined copper cathodes and cathode sections (-39.0%), metal components (-19.8%), chemicals (-14. 6%) and other manufactured goods. (-11.9 percent).

This more than offsets the rise in prices for other minerals (41.2%), gold (29.3%), machinery and transport equipment (20.7%), and ignition wiring and other electrical wiring kits (15%).

By types of goods, manufactured goods made the largest contribution to total exports – $4.17 billion, or 79.8 percent. This is followed by mineral products ($541.87 million, or 10.4 percent) and agricultural products ($373.14 million, or 7.1 percent).

Japan was the largest buyer of Philippine-made products in January, spending a total of $866.25 million or 16.6% of total exports during the month. Rounding out the top five are the United States of America ($738.26 million), the People’s Republic of China ($666.99 million), Hong Kong ($530.16 million) and Singapore ($318.47 million).

Imports of electronics are also falling

As for imports, incoming deliveries of electronic products decreased by 12.9 percent to $2.44 billion and accounted for 22.2 percent of the total.

They are followed by mineral fuels, lubricants and related supplies, which were $2.06 billion (18.8% of total) up 70.6% year on year, and transportation equipment (8.1%) , the value of which increased by 3.7% to $890 million.

By type, imports of raw materials and intermediate goods accounted for 35.6 percent and amounted to $3.91 billion, down 12 percent from January 2022. Imports of capital goods ranked second with a share of $3.16 billion (28.8 percent of the total and down 1.3 percent year on year). ), followed by mineral fuels, lubricants and related products.

The Philippines received most of its imports from China, purchasing $2.32 billion or 21.1 percent of the total.

Rounding out the top five trading partners in terms of imports for the month are Indonesia ($1.16 billion), Japan ($958.70 million), South Korea ($866.19 million) and the United States ($696.99 million).

Gives up anxiety

A sharp drop in exports was noted by China Banking Corp. economist Domini Velázquez, who said it heralds “a period of much weaker trade performance”.

“Global trade continues to deteriorate as demand declines,” she added.

“Electronics, which made up the bulk of the country’s exports, also fell by double digits for the second month in a row. The semiconductor industry is weakening amid a slowing global economy and a growing tech feud between the US and China.”

While imports have improved overall, a 12 percent drop in supplies of raw materials and intermediate goods likely indicates a “weakening economy,” Velázquez continued.

“In particular, imports of materials used to manufacture electronics and chemicals have declined,” a China Bank economist said.

Meanwhile, the overall merchandise trade deficit could narrow going forward given the underlying effects, especially after last year’s sharp rise in oil prices.

However, “while we expected a relatively smaller trade deficit this year as the cost of imports declined, weaker global demand appears to have weighed heavily on exports,” Velasquez said.