Trade gap shrinks to $2.18B in Dec

The country’s trade deficit shrank year-on-year to $2.18 billion last month as both imports and exports fell, the Philippine Statistics Authority (PSA) reported on Wednesday.

Data from the statistics agency showed that the amount was a 26.4-percent contraction from $2.9 billion in December 2019, but was 23.3 percent wider than November’s $1.7 billion.

Inbound shipments fell by 9.1 percent to $7.9 billion in the 12th month from $8.7 billion a year earlier, while outbound ones slipped by 0.2 percent to $5.7 billion from $5.8 billion.
Total external trade hit $13.66 billion, down 5.6 percent from the year-earlier $14.46 billion.

The PSA attributed the decline in exports to decreases in commodities, led by cathodes and sections of cathodes and of refined copper (-21.0 percent), machinery and transport equipment (-11.1 percent), and gold (-0.5 percent).

It blamed the reduction in imports on the drop in mineral fuels, lubricants and related materials (-50.8 percent), transport equipment (-34.8 percent), industrial machinery and equipment (-21.7 percent), miscellaneous manufactured articles (-5 percent), and telecommunication equipment and electrical machinery (-4 percent).

For full-2020, the deficit reached $21.8 billion, down 46.3 percent from $40.6 billion the year before.

In a comment, ING Bank Manila analyst Nicholas Antonio Mapa said the latest trade data “highlighted both a fragile global recovery and the ongoing struggles of the domestic economy.”

Exports had been expected to expand last month, but those to major trading partner China faltered, weighing on the sector, according to him.

While electronics exports grew by almost 5 percent, agriculture-based exports shrank by 46.8 percent, which Mapa believed was due to the series of typhoons that struck the country in November.

“Imports remained in the red for the 20th month, with capital imports and fuel imports the main reasons for the contraction. Of note, however, was the surprise gain in consumer imports, eking out a 1.5-percent increase for the month, which could give an indication of some resumption of economic activity as select lockdown measures continue to be relaxed,” he said.

Mapa expects trade trends to continue this year, “with a fragile global recovery expected to limit particular gains for the export sector, while downbeat economic prospects [are] likely translate to subdued import demand as both firms and households limit investment activity.”

The net effect of these trends, he said, would mean the trade gap this year would remain below the pre-pandemic $3.1 billion, which would support the peso as corporate demand for the dollar remained soft.

He warned that the slight widening of the deficit would be negative for October-to-December 2020 GDP figure, which the bank forecasts to be -10.4 percent.

Source: ManilaTimes