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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

MOST FILIPINOS see inflation rising over the next year and do not expect the pace of price increases to normalize anytime soon, according to a survey by Ipsos.

In its latest Cost of Living Monitor, Ipsos found that 80% of Filipinos see the rate of inflation to rise in the next year.

“While economists point out that inflation — and interest rates — have fallen in many countries, you might assume that consumers should be feeling more positive by now about their own financial situation and more optimistic about where their country’s economy is headed in 2025,” Ipsos Chief Executive Officer Ben Page said.

“In fact, they are the opposite. The legacy of high inflation over the past few years is that an expectation of price rises is now hard-wired into the public consciousness,” he added.

The Philippines’ outcome is also much higher than the 65% overall average across 32 countries.

“This is something that is felt across the board. In 21 of the 32 countries surveyed people are more likely to think prices will rise at a faster rate than they did earlier this year,” Ipsos said.

Most Filipinos think that inflation has yet to normalize, the survey showed, with 28% expecting inflation to never return to normal. On the other hand, 27% see prices normalizing after next year, within the next year (26%), within the next six months (5%), and within the next three months (7%).

Only 6% of respondents said that inflation had already normalized.

Inflation quickened to 2.5% in November from 2.3% in October as food prices rose after a series of typhoons hit the country. In the 11-month period, headline inflation averaged 3.2%.

This year so far, inflation has settled within the 2-4% range, except for the 4.4% spike in July.

The central bank expects inflation to settle at 3.1% this year, 3.2% in 2025 and 3.4% in 2026. However, the Bangko Sentral ng Pilipinas (BSP) has said that the risks to the inflation outlook for next year until 2026 have shifted to the upside.

“While inflation rates are going down, people are not feeling it in the way policy makers and central banks would have hoped,” Ipsos said. “People expect price rises across all areas of spending, from utilities to food.”

Globally, 70% of respondents attribute the state of the global economy as the biggest contributor to the rising cost of living. This is followed by government policies (69%), interest rates (66%), businesses making excessive profits (62%) and the Russia-Ukraine war (58%).

Meanwhile, 75% of Filipinos expect interest rates to rise over the next year.

The BSP began its easing cycle in August this year, delivering a total of 50 basis points (bps) worth of rate cuts so far. This brought the benchmark to 6%.

The Monetary Board could deliver another 25-bp cut at its final policy review of the year on Dec. 19.

“There is often a time lag between inflation rates subsiding and consumer confidence returning. But this time things feel rather different. What we are now seeing in many countries is a rise in the number of people who say they are financially struggling,” according to Ipsos.

The survey also showed that 10% of Filipinos expect their own standard of living to fall over the next 12 months.

In terms of financial management, only 37% of Filipinos are “doing alright.” This is compared to the respondents that said they are “just about getting by” (26%), “finding it quite difficult” (20%), “finding it very difficult” (9%), and “living comfortably” (9%).

Meanwhile, 48% of Filipinos see the economy as being currently in a recession, as far as they are aware. On the other hand, 28% say the opposite while 23% do not know.

Tax cuts

“Across 32 countries people say they prefer tax cuts even if it means less money for public services, over spending more and paying greater taxes,” Ipsos said.

“However, this masks big differences across countries. Türkiye, Romania and the Philippines back tax cuts, while Indonesia and Sweden want better public services.”

The survey found more than half (52%) of Filipinos prefer that their personal taxes be cut even if it means there will be less government spending on public services.

The survey also found 70% of Filipinos expect the taxes that they pay to rise over the next year.

The Department of Finance  has said it does not plan to introduce new taxes this year and potentially until the end of the Marcos administration, apart from those already pending in Congress.

The department’s priority tax measures include the value-added tax on digital service providers, excise taxes on single-use plastics and pickup trucks, the rationalization of the mining fiscal regime, and the motor vehicle road user’s charge, among others. — Luisa Maria Jacinta C. Jocson

Philippine exports of semiconductor and electronic products are likely to be flat in 2025 amid a slump in demand, the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) said.

SEIPI President Danilo C. Lachica said the board affirmed its earlier projection of a 10% decline in semiconductor and electronics exports this year.

“We just finished our board meeting last week. The 10% contraction forecast for 2024 is the same, while exports in 2025 are flat,” he said in a Viber message on Monday.

Mr. Lachica said exports will likely be flat in 2025 as the semiconductor and electronics industry is being affected by a “tough business environment and low demand.”

Exports of electronic products accounted for 55% of the Philippines’ total exports of USD 55.67 billion in the January-to-September period.

In the first nine months, the Philippines exported USD 30.6 billion worth of electronic products, falling 2.2% from the USD 31.28 billion a year ago amid soft demand.

Sought for comment, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the expected protectionist policies of US President-elect Donald J. Trump and trade wars could affect Philippine exports, including electronic products.

“Trump protectionist policies could lead to higher tariffs, and trade wars could slow down global trade and global economic or business activities,” said Mr. Ricafort in a Viber message.

In a report dated Nov. 25, GlobalSource country analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said that Mr. Trump’s plan of imposing 60% tariffs on Chinese goods and up to 20% tariffs on goods from other countries could hurt the Philippines’ exports to the US.

“The US is a major destination for Philippine exports, making up an average of about 16% of total export trade for the last five years,” the analysts said.

“While the share-to-total has slightly declined due to the trade diversification policy of the Philippine government in recent years, a further drop in exports to the US definitely does not bode well for the country,” they added.

Previously, Mr. Lachica said that the country will need more investments to improve its exports mix and make it more globally competitive.

“One of the comments I heard when we were in the US is that the Philippines fell asleep as far as the semiconductor and electronics industry is concerned, referring to the previous administrations,” he said in a panel discussion at the National Exporters Week on Dec. 4.

“In fact, we have significant capital flights from the electronics industry because of the incentive rationalization,” he added.

Mr. Lachica said the “good news” is that the Marcos administration is fixing the issues on incentive rationalization through the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE).

Mr. Marcos last month signed the Republic Act No. 12066 or CREATE MORE Act, which seeks to improve the country’s fiscal incentives policies.

The CREATE MORE Act extended the maximum duration of availment of tax incentives to 27 years from 17 years, as well as reduced corporate income tax for registered business enterprises.

Mr. Lachica said he recognized the government’s efforts to reduce the cost of power and logistics through the Luzon Economic Corridor.

The Luzon Economic Corridor is being undertaken via a trilateral agreement among the Philippines, US and Japan. It is part of a broader collaboration supported by the G7 Partnership for Global Infrastructure and Investment.

“So, we are very optimistic, at least from the industry perspective, to announce that the Philippines is back,” he said. “Of course there are some other issues that we need to face. But the ease of doing business has improved, the infrastructure is improving, and power is improving, so I think it is really a call to action [for our partners] to reconsider the Philippines.” – Justine Irish D. Tabile, Reporter

The Philippines ranked as the second-most attractive emerging market for renewable energy (RE) investment, according to the 2024 Climatescope report by BloombergNEF.

The Philippines climbed two spots to second spot out of 110 emerging markets in the 13^th annual edition of the Climatescope report.

It received an overall score of 2.65 out of 5, based on three parameters: fundamentals, opportunities, and experience.

“The Philippines has been on a growth path since 2021, and for the first time has entered second place in the ranking, knocking mainland China down a slot,” according to the report by BloombergNEF, which is a strategic research provider covering global commodity markets.

This was the country’s highest ranking after placing fourth in 2023, 10^th in 2022, and 20^th place in 2021.

“The government has established a target of 35% renewable energy in power generation by 2030, and the Philippines stands out as the only emerging market in the Asia-Pacific region (APAC) to have all of the renewable energy policies surveyed by Climatescope — auctions, net-metering schemes, tax incentives and a clean energy target — in force,” BloombergNEF said.

India emerged as the most attractive emerging economy for the second year in a row with a score of 2.73 due to its “bold renewable energy target” and its ongoing efforts to achieve the goal.

The Philippines was ahead of China (2.61), Kenya (2.59) Romania (2.57), Brazil (2.54), Chile (2.51), Nigeria (2.51), Namibia (2.51), and Guatemala (2.50).

Investor interest in the Philippines’ renewable energy sector received a boost after the government allowed full foreign ownership in the sector starting November 2022.

Foreign nationals and foreign-owned entities are now allowed to explore, develop and use RE resources such as solar, wind, biomass, ocean or tidal energy in the Philippines. Foreign ownership of RE projects was previously limited to 40%.

According to the Climatescope report, the Philippines had a score of 3.83 on fundamentals, the highest among emerging markets. This measures the foundational mechanisms for renewable energy development in a market, including its clean energy policies, operating rules and incentives, and batteries to the deployment of investment.

In terms of opportunities, the Philippines ranked 8^th with a score of 2.11. This parameter focuses on identifiable traits that mark a market’s attractiveness to investors.

Over the past five years, the Philippines has attracted $5.2 billion in RE investments, but only 7% of the total came from foreign investment, according to the report.

With the power demand increasing and the Philippine market still heavily reliant on fossil fuels, there is still a need to grow its renewable energy capacity, BloombergNEF said.

According to BloombergNEF, peak demand rose 63% from 2014 to 2023, reaching 19.2 gigawatt-peak in 2023.

The Department of Energy (DoE) said that the ranking reflects “the growing confidence of the global community in our country’s commitment to clean energy transition and sustainable growth.”

“This recognition inspires the DoE to further intensify its efforts in achieving our renewable energy goals, ensuring that our nation remains a global beacon of progress in the energy transition,” the department said in a statement on Monday.

While most of the RE investments are from domestic investors, the DoE said it is looking forward to realizing the potential of increased foreign participation as it allowed full foreign ownership in renewable energy projects.

“The journey, however, is far from over. With the peak demand growth assumptions of around 5.3% annually from 2024 to 2028, the need to further accelerate renewable energy development is still crucial to address the energy needs of the country’s expanding economy,” the agency said.

Asked to comment, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that there are opportunities for RE investors in the Philippines.

“RE, especially solar and wind, also suitable for an archipelago such as the Philippines, especially off grid areas,” he said in a Viber message. “This is manifested by the fact that REs are the biggest foreign investments in recent years.”

As of November, the Board of Investments has approved a total of P1.5 trillion in investment pledges, of which P1.35 trillion are primarily in the renewable energy sector.

As of end October, a total of 17,248.53 megawatts (MW) of committed power projects and an additional 1,870 MW are expected to be operational from 2024 to 2030, including those with commercial operation dates that are yet to be determined by the power generators. – Sheldeen Joy Talavera, Reporter

The Philippines’ gross international reserves (GIR) dipped at the end of November as the government settled some of its foreign currency-denominated debt, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Preliminary data showed dollar reserves slipped by 2.4% to USD 108.5 billion at the end of November from USD 111.1 billion at the end of October.

Year on year, gross international reserves rose by 5.6% from USD 102.7 billion.

“The month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the central bank said.

The level of dollar reserves was enough to cover about 4.3 times the country’s short-term external debt based on residual maturity.

The GIR as of end-November was also equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income.

“By convention, GIR is viewed to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income,” the BSP said.

Ample foreign exchange buffers protect an economy from market volatility and ensure that a country can pay its debts in the event of an economic downturn.

Net foreign currency deposits dropped by 18% to USD 1.75 billion at end-November from USD 2.14 billion a month ago. It likewise fell by 8.1% from USD 1.91 billion a year ago.

The central bank also attributed the decline in dollar reserves to its “net foreign exchange operations and downward valuation adjustments in the BSP’s gold holdings due to the decrease in the price of gold in the international market.”

Reserves in the form of gold were valued at USD 11.03 billion, down by 2.9% from USD 11.35 billion at end-October. However, it was up by 1.9% from USD 10.82 billion in the same period a year earlier.

November saw gold’s first monthly price drop since June due to a post-US election sell-off driven by Donald J. Trump’s win, Reuters reported.

Spot prices for the precious metal are down 5% since hitting a record high of USD 2,790.15 an ounce on Oct. 31 but are still up 28% so far this year.

BSP data showed foreign investments stood at USD 91.2 billion as of end-November. This was 2% lower than USD 3.1 billion in the previous month but higher by 6.8% from USD 85.4 billion last year.

“Similarly, the net international reserves (NIR) declined by USD 2.6 billion to USD 108.4 billion as of end-November 2024 from the end-October 2024 level of USD x111 billion,” the BSP said.

Net international reserves are the difference between the BSP’s reserve assets or GIR and reserve liabilities, such as short-term foreign debt and credit and loans from the International Monetary Fund (IMF).

The country’s reserve position in the IMF dipped by 2.3% to USD 668.2 million from USD 683.9 million a month earlier. Year on year, it slumped by 15.1% from USD 787.2 million.

Special drawing rights — the amount the country can tap from the IMF — inched up month on month to USD 3.81 billion from USD 3.8 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the lower GIR level was due to the net payment of the National Government’s foreign debt maturities and other US-denominated obligations.

He also cited the BSP’s net foreign exchange operations in view of the US dollar-peso volatility during the month.

In November, the peso fell to the P59-per-dollar level twice, hitting the record low on Nov. 21 and 26.

“For the coming months, the country’s GIR could still be supported by the continued growth in the country’s structural inflows from overseas Filipino worker (OFW) remittances, BPO (business process outsourcing) revenues, exports, relatively fast recovery in foreign tourism revenues,” Mr. Ricafort said.

Remittances typically see a boost in December as OFWs send more money for their families amid the holiday season.

Latest data from the BSP showed cash remittances rose by 3.3% to USD 3.01 billion in September. This brought the total to USD 25.23 billion in the January-September period, up by 3% year on year.

The central bank expects remittances to grow by 3% this year.

However, Mr. Ricafort also noted the government’s plan to reduce foreign borrowings to manage foreign exchange risks.

The government’s borrowing plan this year is set at a 75:25 mix, in favor of domestic sources.

For 2025 to 2027, the NG plans to source at least 80% of its borrowing program from domestic sources, and 20% from foreign lenders.

Finance Secretary Ralph G. Recto has said they are aiming to reduce the share of external borrowings in its borrowing program.

The BSP expects the country’s GIR to settle at USD 106 billion by end-2024. – Luisa Maria Jacinta C. Jocson, Reporter

Manufacturing output contracted to second straight month in October, the Philippine Statistics Authority (PSA) reported on Friday.

Preliminary results in the PSA’s latest Monthly Integrated Survey of Selected Industries (MISSI) showed that the factory output, as measured by the volume of production index (VoPI), fell by 1.8% year on year in October from the 5% decline in September. This was a reversal from the 1.4% growth a year earlier.

On a month-on-month basis, the manufacturing sector’s VoPI increased by 2.8%, a turnaround from the 2.5% contraction in September. Stripping out seasonality factors, output declined by 0.4%, slower compared with the 3.6% contraction last month.

From January to October period, VoPI growth averaged 1.7%, than the 5.4% in the same period last year.

To compare, the Philippines’ manufacturing purchasing managers’ index (PMI) of S&P Global for that month eased to 52.9 from 53.7 in September.

A PMI reading below 50 marks a contraction in the manufacturing sector, while 50 marks an expansion.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that that VoPI has a slower decline due to inclement weather, which decreased of the production dates prompted by the suspension of the working days.

“The slower decline (in VoPI) was due to the typhoons (that entered) in the Philippines. There were work disruption in heavily hit areas. They were not able to work because the production and manufacturing facilities were closed,” Mr. Ricafort said in a phone call.

The PSA attributed the slower decline in October’s factory output growth to the annual growth rate of manufacture of beverages industry division at 6.8% from an annual drop of 8%. The beverages industry division account for fifth-largest weight (6.7%) of total manufacturing, after coke and refined petroleum products (7.6%).

Also contributing to the slower annual decline of VoPI in October were the manufacture of wood, bamboo, cane, rattan articles and related products, which rose by 26.4% in October from 24.3% drop in the previous month, and transport equipment (up by 6.7% from 3.2%).

All 22 industry divisions reported capacity utilization rates of above 60% in October.

The top three industry categories for capacity utilization rates were machinery and equipment except electrical (85.9%), other non-metallic mineral products (82.6%), and textiles (82.3%).

Mr. Ricafort said there will be an uptick in in manufacturing sector in November and for the rest of the year due to Christmas season.

“There are a lot of demand in Christmas, since people have income. It is the biggest spending for many people. There get their bonus, and the overseas Filipino workers send money for Christmas spending,” Mr. Ricafort said. — Charles Worren E. Laureta