Exports up 3.7% to $2.724B in February

Merchandise exports were slightly higher in February despite shrinking shipments to the US, but analysts warned of trouble ahead if the war in Iraq is prolonged or if a killer virus continues to batter Asian economies.

Exports, which make up about two-fifths of the country’s overall economy, rose to $2.724 billion in February from $2.691 billion in January, the National Statistics Office (NSO) reported yesterday.

They were also 3.7 percent higher than the $2.628 billion in February 2002, posting the 11th straight month of year-on-year gains.

In the first two months of the year, exports amounted to $5.415 billion, up by only three percent over the $5.259 billion recorded in the same period last year.

Analysts attributed the slight increase to inventory build-up by local firms in anticipation of cost increases resulting from the war in Iraq.

"The only concern I have is that exports growth remains modest and import growth continues to be strong, as in January," said Jojo Gonzales, managing director of Philippine Equity Partners. "We could yet have another month of a trade deficit."

The slim monthly rise of 1.2 percent pointed to tougher times for the Philippines in exporting its key electronics and farm products to the US, Japan and the rest of Asia.

Analysts said a prolonged war in Iraq and the economic fallout from the deadly flu-like Severe Acute Respiratory Syndrome (SARS) could take their toll on trade.

Shipments of electronics – mostly computer parts and semiconductors assembled from imported components – grew 4.5 percent to $1.464 billion in February from $1.4 billion a year earlier but were 3.6 percent lower than January’s $1.519 billion.

The share of electronics in overall exports also shrank to 53.7 percent in February from 56.4 percent in January.

Apparel, petroleum products and wiring sets for vehicles, aircraft and ships were the second, third and fourth top earners.

Threats from war, disease

"Last year, we still posted growth despite the fact that US growth was benign and Japan was muddling along because we were able to gain inroads in other Asian markets," said Cecilia Tanchoco, an economist at Bank of the Philippine Islands.

"But if we see a very protracted war and if SARS affects the revenues of other Asian countries that we trade with, then we might see some slowing down in these economies and an effect on demand for our products."

The government expects exports to grow by between five and eight percent this year. Exports expanded nine percent last year after a 15.5 percent contraction in 2001.

The US continued to be the main destination for Philippine goods in February with a 21.6 percent share of shipments. But the shipments worth $588.68 million were 10.5 percent lower than the $657.51 million in February 2002.

Exports to Japan, the country’s second-biggest market with a 15.2 percent share, fell three percent to $414.27 million in February from the $427.32 million a year earlier.

The Netherlands, in third place, took in $286.13 million worth of Philippine goods, a 29 percent rise from the $221.87 million in February 2002.

The other leading destinations were Hong Kong, Taiwan, Singapore, Malaysia, Thailand, South Korea and Germany. The Philippines’ top 10 markets took in 85 percent of its exports.

Overall exports totaled $5.415 billion in January and February, three percent higher than the $5.259 billion in the first two months of 2002.

"The first two months number is positive," said Tanchoco. "It’s not very, very healthy but in line with expectations." – With reports from Marianne V. Go