Trade deficit likely to swell to record highs until 2020

MANILA, Philippines — Barcelona-based think tank FocusEconomics expects the Philippines to continue to book record trade deficits over the next two years as imports growth continues to outpace exports.

Lindsey Ice, economist at FocusEconomics, said the country’s trade deficit would further swell to record levels of $39.2 billion in 2019 and $41.1 billion in 2020.

She said imports would continue to grow at a faster pace of 9.2 percent and exports at 7.9 percent next year, before slowing to 7.7 percent and 6.7 percent, respectively, in 2020.

Latest data from the Philippine Statistics Authority showed the country’s trade gap widened by 64.7 percent to $26 billion from January to August this year compared to $15.79 billion in the same period last year.

Exports contracted by two percent to $44.91 billion in the first eight months of the year from $45.85 billion in the same period last year.

On the other hand, imports surged 15 percent to $70.91 billion from $61.64 billion due primarily to the 16.1 percent increase in the importation of capital goods as well as 13.4 percent increase in raw materials and intermediate goods.

The inter-agency Development Budget Coordination Committee (DBCC) said the country’s exports would grow two percent and imports by nine percent this year before increasing to six percent and nine percent, respectively, next year.

The DBCC has slashed the Philippines’ economic growth target due to “new realities” in both the local and international landscape, including high domestic inflation, rising global oil prices, and tightening monetary policy in advanced economies.

Economic managers agreed to lower the government’s gross domestic product (GDP) growth target for 2018 to a range of 6.5 percent to 6.9 percent from the previous range of seven to eight percent.

Growth targets for 2019 to 2022, however, remained unchanged at the seven to eight percent level.