Deficit widened in November as foreign trade expands

MANILA, Philippines — Foreign trade expanded at a faster clip in November but the trade deficit widened amid the country's economic reopening.

External trade grew 24% year-on-year to $17.25 billion, the Philippine Statistics Authority reported on Tuesday. This was faster than the 15.2% recorded in October and a reversal from the 6.6% contraction recorded in the same period in 2020.

Broken down, exports inched up at an annualized rate of 6.6% to $6.27 billion in November, faster than the 2% recorded in the previous month. Imports soared 36.8% on-year to $10.98 billion, marking the 10th straight month of growth.

The trade deficit, which is the difference between the export and import bill, rose to a record high of 119.5% year-on-year to $4.71 billion.

For Nicholas Antonio Mapa, senior economist for ING Bank in Manila, the latest figures were enough to" push the trade balance deep into deficit territory" since imports posted strong growth during that month.

"November trade data showed both exports and imports rise although inbound shipment growth accelerated to 36.8%. The surge in imports was much faster than anticipated (28.2% forecast) and was enough to push the overall trade balance deep into deficit territory," he said in an emailed commentary.

For Mapa, global crude oil prices pushed the imports bill up in November, which he said contributed to the trade gap.

"With global crude oil prices staying elevated to open the year, the Philippines could continue to experience wider trade deficits in the near term," Mapa added.

The economy was in the midst of an economic reopening back in November 2021, which saw restrictions loosened as the Delta variant surge eased by then. This was a month before the holiday season, which saw the Philippines get hit by a typhoon and the start of another infection surge by the year's end.

In a commentary on Tuesday, the Bank of Philippine Islands said it still expects the imports to grow amid this new wave of infections, citing improved vaccine rollout keeping demand high for consumers and businesses.

"The availability of vaccines/treatments and the adjustments made by consumers/businesses will likely mitigate the impact of COVID on demand. With exports slowing down, the trade deficit is expected to widen and may even beat the record seen in 2018," BPI said.