Exports plunge 26% in August, marking sharpest drop in 20 years

The country’s export earnings plunged by nearly 26 percent in August — the sharpest monthly drop in at least 21 years — as demand for electronics nosedived sharply in wake of a global economic recession.

Analysts said the worst is yet to come as the Sept. 11 terrorist attacks in the US is certain to take a bigger toll on exports, the key driver of Philippine economy.

The National Statistics Office (NSO) reported yesterday that export earnings in August amounted to only $2.621 billion, down 25.8 percent from $3.529 billion in the same period last year.

"It is increasingly likely that the Philippines may end the year with the worst ever annual decline in exports," said Song Seng Wun, senior economist of G. K. Goh Stockbrokers Pte Ltd.

Song said "based on reliable trade data, the August export drop is the biggest monthly percentage decline since 1980."

He expects exports to fall 16 to 17 percent this year.

For the first eight months of the year, exports were down by 12.98 percent to $21.203 billion from $24.365 billion in the same period last year.

Government economists have forecast a 10- to 15-percent fall in exports in 2001 due to slowing demand for semiconductors and electronic components from the country’s major trading partners — the US and Japan.

"It was expected, this was anticipated when we said that other measures may have to be taken for possible further weakening of the US economy for the rest of the year compounded now by the September 11 tragedy which may result in a 15 percent drop in export and not 10 percent," Bangko Sentral ng Pilipinas (BSP) governor Rafael B. Buenaventura said yesterday.

Despite the drop in exports which is expected to further worsen in the coming months Buenaventura said the BSP will not yet decide on whether to push through with an earlier plan to tap the debt market for a $400-million loan to keep the country’s gross international reserves (GIR) at $14 billion by yearend.

Revenue from electronics, which made up more than half the exports for August, slumped 40.1 percent to $1.313 billion in August from $2.194 billion a year ago.

Luz Lorenzo, research head of ATR King Eng Capital Partners Inc., said with the slump in exports, the country has to rely on domestic factors, like agriculture production and domestic consumption, to drive economic growth.

Earlier, Finance Secretary Jose Isidro Camacho said the government was unlikely to alter its 2001 gross domestic product (GDP) forecast of 3.3 percent to 3.8 percent, given there is only three months left this year. However 2002 targets may be revised.

Economists have said the country may still be able to achieve its targets if domestic demand offsets weak exports.

Garments, the country’s second top-earner, took a somewhat less violent beating, declining by 14 percent to $210.76 million in August from $245.19 million a year earlier. This was consistent with the 14 percent average decline during the eight-month period when shipments of garments amounted to only $1.647 billion.

Electronics and garments have thus far been the country’s main export earners, generating enough foreign exchange revenues to tide the economy over most of its slumps.

But with the steady decline in global demand for electronics and garments, analysts said these sectors are not expected to have the momentum and capacity to cushion the impact of a global recession on the domestic economy.

By market, the US is still the country’s biggest buyer, accounting for more than 27 percent or $726.09 million in August. This figure is 32 percent lower than last year’s shipments of $1.078 billion.

Shipments to Japan, the second biggest export market, also declined even further to only $365.11 million from $463.02 million last year.