Philippines: Exports post third consecutive contraction in February
April 11, 2019
Merchandise exports continued to slump in February, contracting 0.9% year-on-year, although improved somewhat from the downwardly revised 6.7% contraction recorded in January (previously reported: -1.7% year-on-year).
The decline in February was largely driven by a continued drop in manufacturing exports with sharp falls in shipments of metal components: gold; and machinery and transport equipment. Moreover, exports of electronic products—which account for more than half of total export revenue—weakened in February (February: +0.8% yoy; January: +1.7% yoy). On a brighter note, agricultural exports rose notably, driven by increased shipments of bananas.
Imports meanwhile lost traction in February, rising 2.6% in annual terms, which was down from the revised 3.6% increase registered in January (previously reported: +5.8% yoy). The moderation came on the back of a notable downturn in electronic, and iron and steel imports. On the other hand, transport equipment imports grew at a quick clip in the month.
Overall, the merchandise trade deficit widened to USD 2.8 billion in February 2019 from USD 2.5 billion in February 2018 (January: USD 3.9 billion).
Commenting on February’s results, Nicholas Mapa, senior economist at ING, noted:
“Slowing imports is a cause of concern. Elevated borrowing cost after the central bank's (BSP) aggressive 175 basis point rate hike in 2018 seems to be hampering capital expansion. Add to this the budget delay, which put government projects on hold. As such, capital goods imports are likely to remain weak. Meanwhile, slowing inflation should support household spending, and thereby the consumer goods import growth.”
Author: Lindsey Ice, Economist