Expect narrower trade gap, stronger peso — PNB

MANILA, Philippines — The country’s trade deficit may narrow to $42.1 billion this year, or 3.2 percent lower than last year’s $43.5 billion, according to Philippine National Bank.

Jun Trinidad, economist at PNB, said the monthly trade gap may average at $3.5 billion in the third quarter and $4.1 billion in the fourth quarter.

Trinidad said the likelihood of a swelling trade deficit in the second half comprises the fundamental risk to the peso outlook.

The listed bank sees the peso ending at 52.3 to $1 this year, slightly stronger than last year’s 52.58 to $1.

“Pressure on the peso may persist, but perhaps not as severe as last year if the trade deficit outlook narrows. We expect the peso at 52.30 by end-year barring any global risk-off triggered by stronger recession risk,” he said.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit narrowed by 15.4 percent to $3.28 billion in May from $3.88 billion in the same month last year as exports rose, while imports declined.

Exports inched up by one percent to $6.16 billion from $6.09 billion last year, while imports declined by 5.4 percent to $9.43 billion from $9.97 billion.

Trinidad said any pressure on global value chains in Asia owing to the persistent US-China trade conflict and lackluster global demand is probably getting reflected primarily on the non-tech side of manufactured exports.

“With exports to countries locked in tariff wars still registering strong gains, the downside effect of the US-China trade war may not yet be as severe on Philippine exports,” he said.

The country’s trade gap widened by 5.3 percent to $16.51 billion from January to May compared to $15.68 billion in the same period last year. Exports slipped by 1.3 percent to $28.11 billion in the first five months from $28.48 billion, while imports inched up by one percent to $44.61 billion from $44.16 billion.