Philippines: Merchandise exports rebound in September, imports remain in freefall
Merchandise exports ticked up 2.2% in annual terms in September (August: -12.8% year-on-year), marking the first increase since February. September’s reading was supported by higher shipments of chemicals, electronics, minerals and metals, and is a sign of the recovery in external demand.
Meanwhile, imports year-on-year dived 16.5% on an annual basis in September (August: -21.3% yoy). While September’s reading marked the softest decline since February, it was still indicative of weak domestic demand. As a result, the merchandise trade balance improved, recording a USD 1.7 billion deficit in September (September 2019: USD 3.4 billion deficit; August 2020: USD 1.8 billion deficit). Lastly, the trend pointed up, with the 12-month trailing merchandise trade balance recording a USD 26.3 billion deficit in September, compared to the USD 28.0 billion deficit in August.
Regarding the implications for economic activity and the peso, Nicholas Mapa, senior economist at ING, comments:
“The Philippine trade deficit continues to tighten given stark import compression, driven by a broad-based decline in economic activity. The sharp contraction in the trade deficit has helped the current account swing back into surplus, which remains a positive for PHP in the near term. However, the sustained downturn in imports of raw materials and capital goods points to a continued deterioration in productive capacity and potential output, which does not bode well for prospects for the economic recovery. We expect PHP to remain supported to close out the year.”