October trade gap widest in over two years

The Philippines’ trade-in-goods deficit ballooned to nearly USD 6 billion in October, the biggest trade gap in over two years, as exports continued to decline while imports grew at its fastest pace in six months, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary data from the PSA showed the country’s trade-in-goods balance — the difference between exports and imports — stood at a deficit of USD 5.8 billion in October, up 36.8% from the USD 4.24-billion deficit in October last year.

Month on month, the trade gap widened by 13.8% from the revised USD 5.1 billion in September.

October saw the widest trade deficit in 26 months or since the USD 5.99-billion gap in August 2022.

For the first 10 months, the trade deficit widened by 3.6% to USD 45.22 billion from the USD 43.64-billion gap a year ago.

The value of exports declined for the second straight month in October, falling by 5.5% year on year to USD 6.16 billion from USD 6.52 billion a year ago. In September, exports dropped by a revised 7.6%.

October’s export haul was the lowest level since USD 5.57 billion in June this year.

For the first 10 months, exports reached USD 61.83 billion, inching up by 0.4% from USD 61.6 billion in the same period a year ago.

On the other hand, merchandise imports rose by 11.2% to USD 11.96 billion in October from USD 10.76 billion last year. This marked the fourth straight month of imports growth and was the fastest pace since 13% in April.

The import value in October was the highest level in 25 months or since USD 12.01 billion in September 2022.

Year to date, imports went up 1.7% to USD 107.05 billion.

Slower global export markets coupled with a strong demand for imports ahead of the holiday season explained the larger deficit in October, University of Asia and the Pacific Senior Economist Cid L. Terosa said in an e-mail interview.

“Exports declined because of lethargic global export markets. Imports grew further because of strengthening demand for production goods needed to produce more goods and services for the holidays,” he said.

Mr. Terosa also noted the value of imports went up due to the peso’s weakness.

The peso closed at P58.1 per dollar at end-October, weakening from the P56.03 finish at end-September.

“The stronger peso exchange rate versus the dollar in October made exports more expensive for international buyers; while also making imports cheaper from the point of view of local buyers that also partly increased demand for imports,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

This year, the Development Budget Coordination Committee (DBCC) expects 4% and 2% growth in exports and imports, respectively.

Exports slump

Manufactured goods, which made up the bulk of the country’s exports, fell by 11.2% to USD 4.72 billion in October from USD 5.31 billion in the same month last year.

On the other hand, exports of mineral products expanded by 9.7% to USD 681.57 million while exports of agro-based products jumped by 41.3% to USD 591.98 million.

By commodity group, electronic products, which accounted for over half of exported manufactured goods, dropped by 23.3% annually to USD 2.87 billion.

Semiconductors, which accounted for the bulk of outgoing electronic products, slumped by 33.8% to USD 1.95 billion.

Exports of other manufactured goods increased by 57.9% to USD 510.58 million, while other mineral products fell by 6.4% to USD 297.87 million in October.

The United States remained the top destination for Philippine-made goods, with exports valued at USD 995.26 million accounting for 16.2% of the total.

It was followed by Japan with USD 940.98 million (15.3% share), China with USD 853.52 million (13.9%), Hong Kong with USD 592.23 million (9.6%), and Thailand with USD 304.96 million (4.9%).

Imports

Meanwhile, imports of raw materials and intermediate goods grew by 5.5% to USD 4.17 billion in October.

Imports of capital goods climbed by 21% to USD 3.46 billion, while consumer goods increased by 29% to USD 2.6 billion.

By commodity group, electronic products had the highest import value at USD 2.67 billion, up 21% in October from USD 2.21 billion a year ago.

Imports of semiconductors, which accounted for the bulk of electronic products, went up by 18.1% to USD 1.81 billion.

Imports of mineral fuels, lubricants and related materials, on the other hand, fell by 10.4% year on year to USD 1.69 billion, while transport equipment jumped by 37.4% to USD 1.22 billion.

China was the biggest source of imports in October with USD 3.07 billion worth of goods, accounting for 25.6% of the total import bill.

It was followed by Indonesia with USD 1.01 billion (8.5% share), South Korea with USD 989.72 million (8.3%), Japan with USD 926.8 million (7.7%), and the United States with USD 754.16 million (6.3%).

Mr. Terosa said he expects imports to increase further as the holiday season approaches while exports will continue to face “sleepy global markets” due to geopolitical instability around the world, further widening the deficit in November and December.

In a note, Chinabank Research said weakness in exports could persist until next year.

“Potentially muted demand for electronics next year could keep export growth restrained… Combined with rising import demand, this could result in wider trade deficits. On the other hand, increasing demand for both consumer goods and production inputs bodes well for consumption and business activities,” it added. – Karis Kasarinlan Paolo D. Mendoza, Researcher