Trade gap balloons to $4.7 billion

MANILA, Philippines — The country’s trade shortfall widened to a record high in November as the economy reopened, with imports, particularly oil, flowing in at faster-than-expected pace.

Data from the Philippine Statistics Authority (PSA) showed the trade deficit soared by 119.5 percent to reach a record-high $4.71 billion in November, from $2.14 billion in the same month a year earlier.

The November data was also a significant jump from the $4.02 billion trade gap recorded the previous month.

Imports continued to accelerate, growing above expectations at 36.8 percent to $10.98 billion from $8.03 billion a year ago.

Exports, on the other hand, eased to a six-month low and increased by only 6.6 percent to reach $6.41 billion. Still, this remains among pre-pandemic highs.

For the 11-month period, the country’s trade shortfall expanded by 71 percent to $37.92 billion as imports continued to outpace exports.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the record-high trade deficit was due to further reopening of the economy during the month.

In November, the alert level system was adopted nationwide, with Metro Manila and several other areas downgraded to Alert Level 2, allowing more business and economic activities.

ING Bank senior economist Nicholas Mapa emphasized that one of the major factors for the stark widening of the trade gap in November was higher fuel importation, which reached $1.55 billion from just $643 million a year ago.

“Costlier imported crude oil translated to overall fuel imports rising sharply, which in turn helped bloat the trade deficit to its current record high,” Mapa said.

“With global crude oil prices staying elevated to open the year, the Philippines could continue to experience wider trade deficits in the near term,” he said.

Ricafort said the trade deficit could remain at the $4-billion level in the coming months, “for as long as global oil and commodity prices remain elevated amid continued disruptions in the global supply chains that could be aggravated by the more transmissible Omicron variant.”

Despite the recent tightening of restrictions due to the Omicron variant, Mapa noted that economic reopening will likely be sustained as authorities look for creative ways to keep the economy up and running during periods of heightened mobility curbs.

He said that with the current account expected to remain in deficit territory, pressure on the Philippine peso to weaken should persist this year, although other factors such as the looming Fed rate hike will likely play a major role in the currency’s trajectory.

Further, overall external trade in goods in November went up by 24 percent to $17.25 billion from $13.9 billion year-on-year.

Imports have been outstripping the country’s exports as the economy continues to recover. Imports for the 11-month period rose by 30.4 percent to $106.3 billion.

Apart from fuel, other inbound shipment of goods and services also expanded with the sub-sectors of medicinal and pharmaceutical products, industrial machinery and equipment, and transport equipment leading the growth.

China is still the country’s biggest supplier of imported goods at $2.28 billion or 21 percent of the total.

Meanwhile, year-to-date exports increased by 15.2 percent to reach $68.37 billion.

For November, dollar earnings from electronic products, the country’s top export, just inched up by 5.6 percent to $3.71 billion.

Other exports that showed strength during the month include coconut oil, electronic equipment and parts, and chemicals. Exports of ignition wiring sets, machinery and transport equipment, and metal components, were down during the month.

The country’s top 10 exports, which cornered 83 percent of the total, went up by six percent to $5.21 billion during the month.

The top 10 export destinations of the Philippines also increased by 7.1 percent to $5.16 billion. Gains were recorded in Vietnam, Netherlands, Hong Kong, Singapore, Germany and Taiwan.

The US was the top destination with $998 million or 15.9 percent of total.