THE country’s trade deficit continued to widen in November from a year earlier but the gap was slightly narrower compared to October, the Philippine Statistics Authority (PSA) reported on Thursday.
Inbound shipments rose by 6.8 percent year-on-year to $9.469 billion, PSA data showed, while exports contracted 0.3 percent to $5.569 billion.
Total trade in goods subsequently hit a deficit of $3.901 billion in November, higher than the $3.280 billion recorded a year earlier but down from the previous month’s $4.081 billion.
Year to date, the trade deficit widened by 61 percent to $37.687 billion, from $23.408 billion, as exports contracted by 0.9 percent and exports surged by 15.8 percent.
ING Bank Manila senior economist Nicholas Antonio Mapa pointed out that imports of capital machinery and raw materials helped widen the year-to-date trade gap.
Raw materials and intermediate goods accounted for the largest share of total imports at 38.6 percent, up 6.7 percent to $3.65 billion from a year earlier.
Imports of capital goods worth $3.02 billion, meanwhile, took a 31.9 percent share — 4.9 percent higher year on year.
“With both the government and corporates doubling down on this capital-intensive growth, wide trade gaps will likely be the norm in the medium term,” Mapa said in a comment.
Electronic products, meanwhile, remained the country’s top export with earnings of $3.16 billion. The amount, which accounted for 56.7 percent of total export revenues in November, was down 1.6 percent from the previous year.
“These products rely heavily on imported components for production, which could explain why several episodes of peso depreciation have not been able to give the export sector the type of boost it sorely needs,” ING’s Mapa said.
He said the current account would likely remain in deficit as imports continued to outpace outbound shipments.
The current account — a major component of the balance of payments — consists of transactions in goods, services, primary income and secondary income, and measures the net transfer of real resources between the domestic economy and the rest of the world.
The deficit hit $2.907 billion in the third quarter, a reversal from the $1.1-billion surplus recorded a year earlier. It brought the year-to-date shortfall to $6.471 billion, also a reversal from the $968-million surplus seen in the comparable 2017 period.
Reacting to the PSA data release, the National Economic and Development Authority (NEDA) underscored the need to improve implementation of government’s mid-term export strategies.
It noted that the country’s total merchandise trade grew by 4.1 percent to $15.038 billion — the slowest pace since the 2.7 percent clocked in March the same year.
“Moderation in global growth appears inevitable in 2019. Given a less encouraging global economic outlook, the country needs to ramp up the implementation of strategies outlined in the Philippine Export Development Plan 2018-2022,” Socioeconomic Planning Secretary Ernesto Pernia said.
Pernia also pointed out that support for micro, small, and medium enterprises (MSMEs) was necessary to increase their participation in global value chains.
“Simplifying loan processes, provision of financial literacy trainings, and facilitation of linkages between MSMEs and large corporations are some ways to spur the internationalization of MSMEs,” he said.
Pernia reiterated a call to amend the Foreign Investment Act to allow foreign firms to relocate manufacturing to the Philippines for both domestic and regional markets.
“A widening current account balance due to rising capital goods imports and anemic exports growth is a cause for concern. The widening gap emphasizes the need to reform legislation to allow foreign investments in firms catering to the domestic market, in addition to expanding their exporting activities,” he said.