Easing exports temper foreign trade growth in October

MANILA, Philippines — Foreign trade grew at a slower pace in October, as exports sales turned sluggish while rallying oil price pushed up the Philippines’ import bill.

External trade rose 15.2% year-on-year to $16.8 billion, the Philippine Statistics Authority reported on Friday. This was slower than the 17.1% uptick in September and a reversal from 10% contraction a year ago, preliminary data showed.

That trade still managed to post growth despite lingering pandemic uncertainties was nevertheless a positive development for Nicholas Antonio Mapa, senior economist at ING Bank in Manila, as the expansion indicated that local firms were optimistic on the country’s recovery. 

“With the economy in recovery mode, we’re seeing corporates restocking drawn down inventories as they remain confident of the recovery efforts. Exports managed to grow but were weighed down by the mainstay electronics component which managed to expand only marginally,” Mapa said in a Viber message. 

“The import bill was also bloated by pricier crude oil. However, despite the supersized trade deficit, the peso has managed to steady and will likely take its cues more so from the financial market flows set to be dictated by the pace of the Fed taper and rate hikes,” he added.

Broken down, exports went up at an annualized rate of 2% to $6.41 billion in October, slower compared with 6.4% expansion posted in the preceding month. Imports, on the other hand, surged 25.1% on-year to $10.43 billion, marking the ninth consecutive month of growth.

With the import bill growing at a faster pace than export sales, the Philippines’ trade deficit stood at $4.02 billion in October, slightly bigger than $4 billion gap in September.

But ING Bank’s Mapa noted that while inbound shipments of capital goods grew in October, the increase was “shallow” and “modest”, suggesting that “potential output will remain curtailed for now” which would continue to weigh on economic growth.

But on the bright side, Mapa said “concerns that the peso would rise rapidly to P53 are likely to fade now” as a modest jump in imports temper demand for dollars.