Philippines: Merchandise exports contract in September; import downturn worsens
Merchandise exports fell 2.6% in annual terms in September, down from the meager 0.8% increase registered in August. The decline was driven by a drop in manufacturing exports, particularly for metal components, machinery and transport equipment, and apparel. Moreover, growth in exports of electronic products—which account for more than half of total export revenue—moderated (September: +3.8% year-on-year; August: +6.6% yoy). On a brighter note, agricultural shipments surged in September, although this is partially due to a base effect from a sharp contraction in the same month a year prior.
Imports, on the other hand, contracted for the sixth consecutive month in September, falling 10.5% over the same month a year prior. This was worse than the 8.8% decline registered in August and marked the poorest performance in over five years. The contraction came on the back of plunging imports of raw materials and intermediate goods, and mineral fuels amid lower global crude oil prices. On the upside, capital goods, and consumer goods imports rebounded in the month.
The merchandise trade deficit narrowed sharply to USD 3.1 billion in September, which was nearly one quarter lower than the USD 4.0 billion shortfall in September 2018, but larger than August’s USD 2.7 billion deficit.
The sustained decline in imports implies the external sector’s contribution to growth in the third quarter likely improved. Moreover, as ING Senior Economist Nicholas Mapa notes, a recovery in imports of capital goods suggests a revival in investment:
“The September trade report also shows some green shoots for the return of investment activity. After dropping substantially in 2Q, capital formation is set to rebound in 3Q and beyond with capital goods imports picking up after stalling in the first half of the year. Monetary easing and a general improvement in risk sentiment has pulled corporates out of the woods and they are now bolstering the consumption-heavy growth story.”