Trade deficit widens 23% in May

MANILA, Philippines - The country’s trade deficit widened 23 percent in May as increased demand for capital goods caused inbound shipments to continuously outpace exports, the Philippine Statistics Authority (PSA) reported yesterday.

Exports rose 13.7 percent to $5.489 billion last May from $4.828 billion a year ago while imports grew 16.6 percent to $8.242 billion from $7.068 billion in 2016. This resulted in a deficit of $2.753 billion in May, up from $2.240 billion in 2016.

Socioeconomic Planning Secretary Ernesto Pernia said the growing trade deficit was largely due to higher imports of capital goods used for manufacturing, which should be considered a positive development as it spurs economic activity.

“I think in terms of trade deficit, the deficit is caused by import of capital equipment and intermediate goods for production. It’s actually a positive thing when import growth is caused by capital goods for production. In fact that has been the trend,” he told reporters.

In May, higher importation of the following commodities were seen in metal products; transport equipment; iron and steel; mineral fuels, lubricants and related materials; miscellaneous manufactured articles; electronic products; telecommunication equipment and electrical machinery.

  Higher exports of the following commodities, meanwhile, were registered in May: cathodes and sections of cathodes, of refined copper; coconut oil; other mineral products; ignition wiring set and other wiring sets used in vehicles, aircrafts and ships; metal components; electronic products; machinery and transport equipment.

Pernia said the deficit trend may “possibly” be sustained this year as more capital goods are imported for major construction projects.

The growth in exports, he said, is in line with the pick up in global demand.

“Our country’s trade growth is consistent with the global pick up. We are striding forward with world trade performers and we intend to match this growth with sound macroeconomic policies,” he added.

In terms of markets, countries in East Asian countries remain strong trade partners with 48.3 percent share in export revenue and 46.2 percent share in imports.

Trade with ASEAN is also strong, with 15.7 percent share in export receipts and 26.1 percent share in inward shipments.

Meanwhile, exports to the European Union continued its third consecutive month of double-digit growth at 38.5 percent. ASEAN likewise remains a promising destination for exports, with exports to ASEAN economies growing 25.6 percent in May.

The government expects Philippine exports to increase by about $100 million annually in the next five years as exports to non-traditional markets such as Malta, United Arab Emirates and India are reflected, said Pernia.