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Philippines: Trade gap widens to $3.93 billion in Sept 2018
MANILA, Philippines — Philippine imports hit an all-time high in September while exports remained weak, bringing the trade deficit to $3.93 billion, the highest in nine months amid sustained purchase of capital goods needed for the government’s ambitious infrastructure program, the Philippine Statistics Authority (PSA) reported yesterday, a day before the release of third quarter economic performance.
Socioeconomic Planning Secretary Ernesto Pernia said the importation of capital goods and raw materials is expected to remain elevated until 2019 in line with the government’s massive infrastructure program and growth of the manufacturing sector.
“The growth in import of capital goods could indicate that firms are making long-term investments. The import of raw materials and intermediate goods could also indicate the vibrancy of the manufacturing sector as it is expected to sustain its positive growth in the remaining months of 2018,” Pernia said.
Imports rose by 26.1 percent in September from a year earlier to a record $9.75 billion, according to PSA data .
Exports, on the other hand, tumbled by 2.6 percent to $5.83 billion in September after three consecutive months of modest increases averaging about two percent.
The latest trade shortfall marked the sixth straight month that the gap stayed well above $3 billion and was a dramatic 125 percent increase from the $1.75 billion deficit incurred in September last year.
For the first nine months, the country’s trade shortfall ballooned to $29.9 billion, sharply higher than the $17.5 billion deficit in the same period last year.
As exports continued to remain weaker because of weak global demand, Pernia said domestic demand need to be ramped up to absorb the output of local firms.
Global growth contracted 2.6 percent in September after three months of positive growth due to a drop in sales of manufactured and mineral products.
“Downward adjustments in economic growth forecasts signal that global growth may have already peaked. Global growth is seen to remain on the positive but to decelerate and be uneven across countries,” Pernia said.
“Moreover, given the weak global demand, the country must really pump up domestic demand. We need to encourage expansion of domestic firms, and also encourage foreign investment in domestic-market oriented firms,” he said.
Pernia also noted the need to create an enabling environment for innovation to produce high value export products.
“Improving the export competitiveness of the country as stipulated in the Philippine Export Development Plan 2018-2022 becomes more urgent. The Plan promotes, among others, an enabling environment for innovation to boost exports growth,” he said.
With the implementation of the Ease of Doing Business Act and the enactment of the 11th Regular Foreign Investment Negative List (RFINL), Pernia hopes cumbersome regulatory impediments to doing business in the country would be eased, attracting more investments to the country.
“The recent RFINL is a step in the right direction of encouraging the expansion of domestic market-oriented firms. But we will require legislative action to further allow more foreign investments in other areas and activities, eventually creating more jobs and reducing imports,” Pernia said.
Weak exports, however, along with soaring consumers prices, have made it difficult for the government to hit its original GDP growth target of seven to eight percent for this year.
“Robust import growth reflects a healthy and burgeoning economy moving into a higher growth path, but exports remain the missing link to the new Philippine growth story,” said Nicholas Mapa, senior economist at ING.
Among the country’s top imports in September were iron and steel, growing nearly 50 percent from a year earlier, and industrial machinery and equipment, up 17.3 percent. Electronics imports grew 29.5 percent.
Source: https://www.philstar.com/business/2018/11/08/1866677/trade-gap-widens-393-billion-sept-2018#t7MKevxqUwLzFhDl.99