Philippines: Merchandise exports drop at a quicker pace in August, collapse in imports suggests suppressed demand
October 9, 2020
Merchandise exports shrank 18.6% in annual terms in August, following July’s 9.1% plunge. August's reading was driven by lower exports of gold, electronics and chemical goods. Meanwhile, merchandise imports slid 22.6% over the same month last year in August (July: -23.8% yoy), indicative of still-weak domestic demand. As a result, the merchandise trade balance deteriorated, recording a USD 2.1 billion deficit in August (July: USD 1.9 billion deficit). Lastly, the trend pointed up, with the 12-month trailing merchandise trade balance recording a USD 28.2 billion deficit in August, compared to the USD 29.1 billion deficit in July.
Regarding the implications for economic activity and the peso, Nicholas Mapa, senior economist at ING, comments:
“Prospects for economic growth continue to dim with imports revealing yet another month of double digit contractions for both consumer goods and capital formation. This development will likely translate into a similar impact on both household consumption and capital formation in the GDP accounts with ING expecting negative growth for both 3Q and 4Q 2020. In short, the sharp narrowing of the trade deficit will likely keep PHP supported for the balance of the year, but import trends point to worrying signs of poor growth prospects for the months to come.”