Philippines trade gap narrows to $4.013B in December 2023

The Philippines’ trade deficit shrunk in December last year as imports contracted faster than exports during the period, data released by the Philippine Statistics Authority (PSA) on Friday showed.

Preliminary data showed that the balance of trade in goods posted a $4.01-billion deficit in December 2023, narrower by 11% from the $4.5-billion trade gap in December 2022.

It is also lower than the $4.729-billion trade deficit seen in November 2023.

A deficit indicates that the value of a country's imports exceeded export receipts, while a surplus indicates more export shipments than imports.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that “higher US, global, local interest rates to better manage inflation and inflation expectations led to slower global economy… slowing global demand, global trade, global investments as unintended consequences, thereby leading to the year-on-year decline in both Philippine imports and exports.”

Philippines’ exports saw a year-on-year decline of 0.5% to $5.78 billion from $5.81 billion in December 2022, while imports also contracted by 5.1% year-on-year to $9.79 billion from $10.32 billion in December 2022.

“The commodity group with the highest annual decrease in the value of exports in December 2023 was other mineral products with $132.99 million. This was followed by machinery and transport equipment with an annual decline of $37.69 million, and electronic equipment and parts with an annual decrease of $24.69 million,” the PSA said.

Hong Kong was the main destination of the country’s exports with the highest value amounting to $951.14 million or a share of 16.5% to the total.

Completing the top five major export trading partners for December 2023 with their corresponding export values and percent shares to the total were as follows:

• United States of America - $904.78 million (15.7%)
• Japan - $703.98 million (12.182%)
• People’s Republic of China - $703.89 million (12.180%)
• Republic of Korea - $325.53 million (5.6%)

Meanwhile, the commodity group with the highest annual decrease in the value of imported goods was mineral fuels, lubricants and related materials with $472.37 million.

“This was followed by electronic products, which declined by $328.45 million, and industrial machinery and equipment with an annual decrease of $48.99 million,” the PSA said.

People’s Republic of China was the country’s largest supplier of imported goods valued at $2.28 billion, accounting foror 23.2% of the country’s total imports in December 2023.

Completing the top five major import trading partners for December 2023 with their corresponding import values and percent shares to the total were the following:

• Japan - $825.23 million (8.43%)
• Indonesia - $823.18 million (8.41%)
• USA - $748.89 million (7.6%)
• Thailand - $649.94 million (6.6%)

The country’s total external trade in goods - the sum of both exports and imports - stood at $15.57 billion in December 2023, down 3.5% from the $16.13 billion total external trade value in December 2022.

“External trade data slowed down amid mostly softer global economic data recently, especially manufacturing and services gauges in major global economies, especially the country's major trading partners, after the sharp increase in Fed/global interest rates since 2022… that increased financing costs or borrowing costs that somewhat weighed on demand for credit to finance imports and exports, as well as to finance spending and investments by consumers, businesses or industries, governments, and other institutions,” Ricafort said. — RSJ, GMA Integrated News