Philippines: Merchandise exports drop at milder pace in July
Merchandise exports plummeted 9.6% year-on-year in July amid lower exports of gold and machinery, following June’s 12.5% decline. However, July´s outturn marked the softest decline since February 2020, in a sign of gradually recovering external demand as economies reopened.
Meanwhile, merchandise imports slid 24.4% on an annual basis in July (June: -23.1% yoy), driven by the tough domestic lockdown. The merchandise trade balance deteriorated, recording a USD 1.8 billion shortfall in July (June: USD 1.4 billion deficit). Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a USD 29.1 billion deficit in July, compared to the USD 30.9 billion deficit in June.
Looking ahead, exports should gradually pick up as trading partners recover, while imports should also improve due to the economic reopening. However, both exports and imports should still remain fairly subdued through the remainder of the year.
Regarding the implications for the peso, Nicholas Mapa, senior economist at ING, comments:
“The continued fall in imports translates into subdued demand for foreign currency and will likely lead to short term support for PHP. The Philippine peso continues to outperform regional peers as the country posts a current account surplus year-to-date in 2020, due mainly to the substantial drop-off in imports, and we can expect this trend to continue going into 4Q 2020.”