The Philippines’ trade gap in January narrowed by 10.7 percent as the growth in exports outpaced that in imports, data released by the Philippine Statistics Authority showed.
The country’s balance of trade in goods in January posted a $3.5 billion deficit, lower than the $3.92 billion deficit in January 2019.
Nicholas Antonio Mapa, ING Bank Manila senior economist, said in a statement yesterday the narrowing trade deficit may be another reason why the peso has managed to outpace regional peers, now under pressure on coronavirus disease 2019 (COVID-19) concerns.
“In the coming months however, we can expect a downtrend for both exports and imports as global trade will likely pullback on supply chain disruptions linked to the virus outbreak,” Mapa said.
Total export sales in January was $5.79 billion, an increase of 9.7 percent from the $5.28 billion total export sales a year ago.
Mapa said while the exports growth in January was driven largely by the electronics sector, a drop in demand for these electronic components may be expected in the coming months as the global supply chain remains impaired by work stoppages and depressed demand due to the COVID-19.
“A projected slowdown or contraction in electronics exports will likely drag on the entire export sector in 2020,” Mapa said.
Meanwhile, total imported goods in January also grew, after nine months of consecutive contraction, but by a mere one percent, from $9.2 billion in January last year to $9.29 billion in the same month for 2020.
Mapa said imports posted growth as fuel imports surged 20.2 percent and capital imports inched up 1.7 percent.
Inbound shipments from China jumped 16.4 percent in January, but Mapa said this pace of growth may not be sustained in the near term given logistical concerns and manufacturing shutdown due to the COVID-19 outbreak.
“Imports from China, despite posting a decent rebound in January will likely reverse to contraction with the bulk of these imports being raw materials for construction or re-export. This development may be crucial for the government and its ambitious infrastructure plans as iron and steel are sourced from China which could lead to delays in the government’s construction efforts. Philippine exports may also revert to contraction in the coming months as raw materials used in the re-export of these products fail to arrive and resulting in overall weakness in overall exports,” Mapa said.
“Meanwhile, the substantial drop in crude oil prices due to production increases from major oil players will likely lead to a smaller energy import bill while raw materials, which posted a 3.7 percent drop in January, will likely remain subdued as imports from China slow down,” he added.
