Philippines: Merchandise exports decline in the first month of 2021
Merchandise exports swung into contraction in the first month of the new year, dropping 5.2% on an annual basis in January, contrasting December’s 1.7% expansion and logging the worst reading in five months. January’s result largely reflected tumbling shipments of machinery and transport equipment and of other manufactured goods. Conversely merchandise imports slid at a sharper rate, falling 14.9 year-on-year (December 2020: -8.2% yoy).
As a result, the merchandise trade balance logged a USD 2.4 billion deficit in January, which was narrower shortfall than the USD 3.5 billion deficit in the same month of 2020 but wider than the USD 2.1 billion deficit in December 2020. Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a USD 20.7 billion shortfall in January, compared to the USD 21.8 billion deficit in December 2020.
Commenting on the trade outlook and its likely impact on the PHP, Nicholas Mapa, senior economist at ING, noted:
“The ongoing slump in imports suggests that growth pains for the Philippines will be around for some time with the sustained drop in capital goods and raw materials suggesting that potential output is falling as well. […] Meanwhile, weak imports have translated to soft corporate demand for the US dollar, which has been one of the key factors behind the PHP’s resilience over the past few months. With the trade deficit now hovering at roughly $2 bn a month (compared to $3.3 bn prior to Covid-19), we can expect soft corporate demand for the dollar to help support PHP in the near term.”