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Saturday, June 24, 2017 | MANILA, PHILIPPINES
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   economic indicators

Date posted: Sunday, May 14, 2017 | Manila, Philippines

BY Leo Jaymar G. Uy, Senior Researcher

Trade data bare economic boost

MERCHANDISE exports again increased by double-digit pace in March, but larger imports payments resulted in a wider trade deficit, the government's statistics agency reported yesterday.

Preliminary data released by the Philippine Statistics Authority (PSA) showed exports jumping 21% year on year to $5.579 billion that month. The turnout continued its streak of double-digit growth since January when it grew 24%, and was a reversal of the 15.1% contraction posted in March of last year.

March lifted year-to-date exports up 18.3% to $15.513 billion from $13.109 billion in 2016’s first quarter.

Socioeconomic Planning Secretary Ernesto M. Pernia had cited merchandise export recovery as a factor behind his expectation of seven percent growth in first-quarter gross domestic product (GDP), which the government will report on May 18.

Imports, on the other hand, grew 24% year on year to $7.882 billion in the same month, faster than both February’s 20.3% and March 2016’s 11.7%.

The rate of inbound shipments has been in positive territory since August 2016, which analysts attributed to increased demand for construction and infrastructure development.

The resulting figures widened the country’s trade deficit to $2.302 billion in March compared to the $1.747 billion shortfall in the same month last year.



On a cumulative basis, trade deficit in the first quarter was at $6.54 billion, bigger than the $5.488 billion recorded in last year’s comparable three months.

EXPORT DRIVERS
On the export side, the performance was brought by robust growth of the country’s top 10 major commodities, consisting of cathodes and sections of cathodes, of refined copper; coconut oil; gold; “other” mineral products; machinery and transport equipment; “other” manufactures; metal components; chemicals; ignition wiring set and other wiring sets used in vehicle, aircrafts and ships; and electronic products.

Manufactured goods, which accounted for 84.1% of total exports during the month, went up 16.5% to $4.693 billion while mineral products -- with a 7.5% share of the total -- increased 94.2% to $418.94 million.

Exports of agro-based products and forest products registered sharp increases as well of 33.6% ($340.31 million) and 116.3% ($7.51 million), respectively.

“Philippine trade during the first quarter of this year has been robust, growing a solid 18.5%. We are really optimistic that we can sustain this momentum in the coming months,” Rolando G. Tungpalan, National Economic and Development Authority (NEDA) officer-in-charge and undersecretary for Investment Programming, said in the agency’s press release yesterday.

Total trade, which is the sum of exports and imports, posted $13.461 billion for the month, up 22.7% compared to February’s 15.7% growth and a turnaround from the 1.4% decline in March 2016.

“In terms of trade growth in March 2017, the Philippines has overtaken Indonesia’s 20.9%, Malaysia’s 20.4%, Vietnam’s 20.2%, and Thailand’s 13.8%,” according to the NEDA statement.

“These figures support our view that the Philippines will be the fastest-growing economy among the ASEAN-5 this year,” Mr. Tungpalan said, referring to the original members of the Association of Southeast Asian Nations (ASEAN).

“We aim to follow-through by forging stronger connections with our ASEAN neighbors as merchandise trade with them comprises a substantial share of 21.9% of our country’s total trade in the first quarter.”

UPBEAT IMPORT SIGNALS
On the import side, driving the increase were nine of the country’s top 10 major imported commodities for the month: iron and steel; cereals and cereal preparations; mineral fuels, lubricants and related materials; “miscellaneous” manufactured articles; industrial machinery and equipment; plastics in primary and non-primary forms; transport equipment; telecommunication equipment and electrical machinery; and electronic products.

By major type of product, raw materials and intermediate goods increased 26.4% to $2.984 billion.

Capital goods increased 24.9% to $2.661 billion.

Consumer goods and mineral fuels, lubricants and related minerals likewise posted increases of 6.6% ($1.322 billion) and 48.7% ($882.77 million), respectively.

“The increase in imports and exports were higher than expected, clearly pointing to improving global demand and upbeat domestic consumption,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.

“The surge in imports largely reflects the country’s firm domestic demand and upbeat business prospects. These two factors likely increased the demand for capital goods and consumer goods. Imports also rose partly because of stronger global economic conditions,” Mr. Dumalagan said.

Mitzie Irene P. Conchada, economics professor at the De La Salle University (DLSU), attributed export growth to “high demand and renewed confidence in the US market.”

TOP MARKETS AND SOURCES
The United States was the Philippines’ top export market in March with a 14.5% share at $809.93 million, a 20.4% increase from last year.

Hong Kong followed, with export receipts growing by 38.9% resulting in a 14.3% share of the total.

On the other hand, orders from Japan declined by 23.1%, albeit still with a 13.7% market share during the month.

China was the Philippines’ top source of imports with a 32.5% increase of inbound shipments during the month for a 17.5% share, followed by Japan’s 39.2% (for a 13.5% share) and Korea’s 53% growth (for an 8.7% share).

For Emmanuel J. Lopez, chair of the Department of Economics at the University of Santo Tomas (UST), the export-import turnout was “expected, but much robust export was attained.”

“Export will always complement the growth in the local production because raw materials are basically imported. However, this will be offset by the increase in the export market,” he said.

Mr. Dumalagan was of a similar opinion, saying: “Some imported raw materials and intermediate goods are used to create products for shipment abroad.”

“Stronger global demand, therefore, might have prompted some export companies to import more raw materials in anticipation of higher foreign demand for their final products.”

Going forward, analysts expect the pace of external demand to continue on the back of a weak peso and steady intra-regional trade.

“It is expected that imports will continue to increase as the Philippines is an active member of the ASEAN and serves as a production network supplying semi-finished/processed goods to countries in the region as well as to the US and EU (European Union),” DLSU’s Ms. Conchada said.

Land Bank’s Mr. Dumalagan, expect exports to improve with “strengthening economic conditions abroad, particularly in the US and the Euro area.”

“On top of this, exports might also increase because of the peso’s depreciation, which makes Filipino goods cheaper in foreign currency terms,” he added.

“These two factors are also the main reasons why exports jumped in the first three months of 2017.”

UST’s Mr. Lopez was likewise optimistic of the country’s trade prospects moving forward.

“As can be gleaned from the steady performance of the export market, the export market will continue to be robust at least until the next six years. This will be highlighted by its significant contribution to the GDP for the first and predictably the second quarter of the year,” he explained.

“I am very bullish with the trade performance of the local economy for this year and this can be seen by the steady performance of export despite a relatively higher import.”

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