PH imports slid for 5th straight month in August
The Philippines’ imports slid for the fifth straight month in August, which economists said partly reflected slower government spending on public investment and infrastructure no thanks to the late 2019 budget approval.
Preliminary Philippine Statistics Authority (PSA) data released Thursday showed that the country’s import bill declined 11.8 percent year-on-year to $8.7 billion in August, reversing the 12.6-percent jump posted a year ago.
This was the biggest drop since sourcing of products from overseas fell below year-ago levels starting April.
In a statement, state planning agency National Economic and Development Authority (Neda) blamed the slide to “declines in imports of raw materials, intermediate goods and capital goods”—products that served as input for capital investments.
“Capital goods, raw materials, fuel and consumer imports all contracted as elevated borrowing costs and the budget delay knocked down capital formation. In particular, all types of capital imports contracted while raw materials related to construction fell as the impact of the Bangko Sentral ng Pilipinas’ (BSP) aggressive 2018 rate hike and the budget delay continued to surface,” ING Bank Manila senior economist Nicholas Antonio T. Mapa said in a note to clients.
“The latest decline in imports shows that the national government’s expenditures did not go into buying capital goods necessary for the infrastructure spending program: declines in iron and steel (down 44.2 percent), transport equipment (down 29.1 percent), and industrial machinery and equipment (down 15.3 percent) are noted,” Security Bank chief economist and assistant vice president Robert Dan J. Roces said in a separate research note, referring to the “Build, Build, Build” program.
On the other hand, exports of Philippine-made goods sustained a fifth consecutive month of growth, up 0.6 percent year-on-year to $6.3 billion in August due to the “modest performance of agro-based products, forest and electronic products,” according to Neda.
“Outbound shipments kept the streak of growth alive amid the [US-China] trade war as the mainstay electronics subsector showed resilience despite the tech slowdown. Exports to the US were up again, growing despite the peso’s recent strength,” Mapa said.
Total two-way foreign trade decreased by 7 percent year-on-year to P14.9 billion.
Declining imports narrowed the trade-in-goods deficit by 33.1 percent to $2.4 billion in August from $3.6 billion during the same month last year.
“While serving to narrow the gap in trade deficit, the persistent decline in imports may be an area of concern as production in sectors requiring import components has also decreased,” the Neda said.
As such, Socioeconomic Planning Secretary and Neda chief Ernesto M. Pernia said “we must continue to initiate programs that provide comprehensive packages of support for products with comparative advantages, including related industries, to facilitate expansion in the international market.”
“As subdued investments in emerging markets, coupled with the persisting trade tensions, continue to hamper global expansion, implementation of timely reforms will vastly improve the country’s resilience to external shocks. Legislations such as the proposed amendments to the Foreign Investment Act, Public Service Act, and Trade Liberalization Act would go a long way in improving competitiveness through much needed foreign direct investments and innovation,” Pernia said.