Sharp exports drop not likely to dent GDP growth – DBS

MANILA, Philippines – Singapore’s DBS Bank Ltd. said the sharp drop in merchandise exports last September would not likely dent the country’s economic growth because of the steady inflows of remittances from overseas Filipinos.

DBS said export earnings of the Philippines would likely contract five percent this  year instead of the earlier projected two percent decline due to weak global demand.

Philippine economic managers penned a five percent export growth this year.

Data from the Philippine Statistics Authority (PSA) showed the country’s total exports plummeted 24.7 percent to $4.4 billion in September from $5.85 billion in the same month last year. This was the steepest fall since the country booked a 27 percent plunge in export earnings in September 2011.

For the first nine months of the year, the country’s merchandise shipments contracted 6.9 percent to $43.75 billion from last year’s $46.97 billion.

 “It is important to watch data in the upcoming months even if this may prove to be just a one-off,” DBS said.

However, the investment bank believes the country’s gross domestic product (GDP) growth would exceed six percent next year amid the continued decline in exports.

 “This data alone does not affect our assessment of the economy by much. We have seen two consecutive years of robust export growth and the moderation this year is partly due to the high basis effects. More importantly, overall GDP growth has been driven mostly by consumption and investment growth anyway,” DBS added.

The investment bank sees the country’s GDP growth easing to 5.7 percent this year from 6.1 percent in 2004 before picking up to 6.1 percent next year.

 “GDP growth circa six percent is still in the offing for next year,” it said.

The country’s GDP growth slowed down to 5.3 percent in the first half of the year from 6.4 percent in the same period last year due to the weak global economy and lack of government spending.

DBS pointed out the decline in exports could be offset by the stable remittances from Filipinos abroad.

 “From the flows perspective, as long as remittances continue to come in around $2 billion per month, external financing risks remain manageable even if the goods trade balance slip into the negative,” the bank said.

Cash remittances from overseas Filipinos climbed 4.1 percent to $16.21 billion from January to August this year from $15.57 billion in the same period last year despite booking a slight decline in August due to the depreciation of some currencies against the US dollar particularly the Euro, Canadian dollar, and the Japanese yen.

With positive inflows from remittances, DBS said the country’s current account (CA) balance is likely to be in surplus of about three percent of GDP next year.