Philippines: Exports tumble at fastest rate in nearly three years in December
February 12, 2019
Merchandise exports plunged at the end of 2018, contracting 12.3% in December over the same month a year prior, down from the 0.3% decline logged in November. The tumble was largely caused by a sharper contraction in electronic products exports (December: -15.2% year-on-year; November: -1.6% yoy)—which account for more than half of total export revenue—due to slumping semiconductor shipments. In addition, machinery and transport equipment, and other manufactured goods exports also retreated in the month. December’s results signal increasing headwinds for the external sector moving into 2019, as the U.S.-China trade war persists, and the external backdrop becomes more challenging due to cyclical slowdowns in key economies including China.
Meanwhile, import growth also contracted, sliding 9.4% in December (November: +6.8% yoy), which marked the worst result since April 2012. The decline came on the back of falling imports for 6 of the top 10 commodities, including transport equipment; mineral fuels and lubricants; and telecommunication equipment and electrical machinery. Moreover, the breakdown by type showed contractions across the board with capital goods and consumer goods both dropping by more than 10%. Consumer goods imports were particularly hit by a sharp decrease in vehicle purchases due to an unfavorable base effect.
Commenting on the unexpected nosedive in imports, Nicholas Mapa, senior economist at ING noted:
“We are mildly concerned about the surprise pullback in capital goods and raw materials. If this continues, this could show that recent aggressive tightening by the BSP is starting to bite into investment appetite, hampering the nascent investment-driven growth story that we have witnessed of late.”
Overall, the merchandise trade deficit narrowed to USD 3.8 billion in December from the USD 4.0 billion deficit registered in December 2017, and was also below the USD 3.9 billion deficit recorded in November 2018.
Philippines Trade Balance Forecast
FocusEconomics Consensus Forecast panelists expect exports and imports to grow 7.6% and 8.9% respectively in 2019, with the trade deficit widening to USD 42.0 billion. For 2020, the panel projects exports and imports to grow 7.2% and 12.3% respectively and the trade deficit to widen further to USD 51.0 billion.