Trade deficit widens to $3.53 billion in February

MANILA, Philippines — The country’s balance of trade in goods expanded in February as imports outpaced exports, with further widening expected in the coming months as the Russia-Ukraine war drags on, causing a sharp increase in fuel imports.

Based on latest data from the Philippine Statistics Authority (PSA), the country’s trade shortfall increased by 30.3 percent to $3.53 billion in February from $2.71 billion in the same period last year.

The February trade gap, however, was lower than January’s $4.72 billion, allowing the shortfall to reach a six-month low.

The country’s imports went up by 20 percent to $9.69 billion in February while exports improved by 15 percent to $6.16 billion.

ING Bank senior economist Nicholas Mapa said the trade deficit appears to be driven mainly by surging fuel imports while other important leading indicators for potential growth, such as capital imports and raw materials have posted only modest gains.

“More worrying is that outside fuel imports, most other sub-sectors saw slower growth, which does not bode well for the expansion hopes for the Philippine economy,” he said.

The country’s trade deficit is expected to widen further as the fuel import bill is seen soaring over the next few months due to rising global oil prices.

The country’s total fuel imports in February more than doubled to $1.67 billion from just $721 million a year ago.

Mapa said the peso may once again be on the defensive as dollar demand picks up onshore amid expensive energy prices.

Nearly two months into the Russia-Ukraine war, oil prices in the world market remained elevated, effectively putting pressure on the domestic front.

Meanwhile, overall external trade in goods in February went up 18 percent to $15.85 billion from $13.42 billion a year ago.

For the two-month period, cumulative total trade reached $32.66 billion, up 19 percent.

As current imports are driven by fuel, Mapa said previous import surge episodes were caused by sudden spikes in inbound shipments that were deemed to be “pro-growth.”

Pre-pandemic, a substantial widening of the trade gap was fueled in large part by outsized gains for productive sectors such as capital goods imports and raw materials imports.

Apart from fuel, double-digit gains were recorded in cereals and cereal preparations, other food and live animals, and transport equipment.

Other increases were noted in electronic products and plastics in primary and non-primary form but declines were seen in industrial machinery and equipment, iron and steel, telecommunication equipment, and miscellaneous manufactured articles.

Over the past two months, total imports have increased 24 percent to $20.45 billion.

China was still the country’s biggest supplier of imported goods, cornering almost 20 percent of the total at $1.77 billion.

On the other hand, outbound shipments grew by 15 percent, aided by the steady demand for electronics and semiconductors. Exports inched up by 12 percent to $12.21 billion for the two-month period.

“Global demand for components and semiconductors appears to be intact and we can expect the overall export sector to take its cue from electronics,” Mapa said.

Dollar earnings from electronic products, the country’s top export, improved by 15 percent to $3.44 billion.

Other exports that showed strength during the month include cathodes, coconut oil, mineral products, chemicals, other manufactured goods, ignition wiring sets, electronic equipment and parts.

Declines were noted in the export of machinery and transport equipment and metal components.

The top 10 export destinations of the Philippines increased by 16 percent to $5.05 billion. Increases were recorded across all 10 destinations except Germany with the highest gain in the Netherlands with 70 percent.

The US was the top export destination with $967 million or 15.7 percent of the total exports for the month.