PHL trade deficit widens 47.62% in May

The Philippine trade deficit widened by 47.62 percent in May as import receipts continue to grow while exports registered a decline, data released by the Philippine Statistics Authority (PSA) showed Tuesday.

The country’s balance of trade in goods expanded to a $3.701-billion deficit in May, up 47.62 percent from the $2.507 billion a year earlier.

Total exports declined by 3.8 percent to $5.76 billion from $5.99 billion in the same comparable period.

Imports increased by 11.4 percent to $9.46 billion from $8.49 billion.
 
“The widening of the trade deficit is expected as we are importing a lot of capital goods to accommodate the investment needs of the country,” Land Bank of the Philippines market economist Guian Angelo Dumalagan said.

A wider trade deficit will subtract some points from growth, but it could be compensated by a stronger expansion in investment spending.

“Moving forward, higher importation of capital goods also sets the stage for stronger growth in the future, as these goods could improve the country’s productive capacity,” Dumalagan said.

Worrisome

But a widening trade gap could be “worrisome” when it contributes to weaken the peso and raise domestic prices, said Cid Terosa, dean of the University of Asia and the Pacific School of Economics.

“At the same time, however, it reflects greater government spending on infrastructure and relatively higher cost of petroleum products in the world market,” he said.

The negative impact of a widening trade deficit on gross domestic product can be offset by positive stimulus from government spending, Terosa noted.

Total merchandise trade grew by 5.1 percent to reach $15.2 billion in May, backed by 11.4-percent growth in imports.

In a separate statement, Socioeconomic Planning Secretary Ernesto Pernia said addressing cumbersome regulations, enhancing trade facilitation, and ensuring better access to trade finance will help improve the country’s business climate for exports.

“The recent passage of the Ease of Doing Business Act of 2018 should promote trade as it aims to reduce bureaucracy and corruption, factors which weigh down on economic activity. Its timely implementation is needed to improve trade facilitation,” Pernia said.

Opportunities from free trade agreements should also be maximized by facilitating programs that will increase awareness of industry players on the benefits of these agreements, the Cabinet official noted.

The recent ratification of the Philippines-European Free Trade Association would boost exports to member states such as Iceland, Liechtenstein, Norway and Sweden.

“Successful negotiations for the PH-EU FTA is expected to secure more permanent preferential duties for Philippine export products compared with the EU generalized system of preferences (EU GSP+), thus further expanding market base,” Pernia said.

Vehicle autoparts, coconuts, bananas, travel goods and handbags, tuna, carrageenan, and activated carbon should be given better exposure as these could potentially become major drivers of exports growth. he said. —VDS, GMA News