Foreign trade slowdown likely dragged Philippine GDP in Q1

MANILA, Philippines — The Philippines’ external trade slowed down in March after a sluggish growth of both exports and imports, which likely weighed on the nation’s economic growth in the first quarter.

Data released Friday by the Philippine Statistics Authority showed foreign trade grew 18.6% year-on-year to $16.6 billion in March, slower compared to 23.5% growth recorded in February.

Exports expanded at an annualized rate of 5.9% in March, down from 15.8% growth in the preceding month. Data showed outbound shipments to Hong Kong, a major trading partner, posted slower growth in March while demand from Japan continued to post single-digit expansion.

Meanwhile, imports grew 27.7% year-on-year in March, slower compared to 28.6% expansion chalked up in February due to lower month-on-month inbound shipments of mineral fuels, lubricants and related materials.

With imports bill continuing to exceed export sales, the Philippines posted a trade deficit of $5 billion in March, bigger than $4.2 billion shortfall in February. Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said “(t)he substantial widening of the deficit was due primarily to the unwinding of Lunar New Year effects, which hit imports particularly hard in February.”

Chanco added that the disappointing imports and exports figures could hurt the country’s gross domestic product in the first quarter. While imports are not included in GDP accounting because these are output produced abroad, they are nevertheless an indicator of domestic demand.

“The complete import data for first quarter show clearly where the economy stumbled at the start of this year. Investment spending remained quite healthy, though the scope for catch-up on this front remains extensive,” Chanco explained in an e-mailed commentary.

“Meanwhile, the Omicron hit to household spending in January is plain to see, with purchases of consumer goods slipping by 0.3% quarter-on-quarter, reversing a small part of the 8.2% leap at the end of last year. Altogether, the full data indicate that net trade was a stronger drag on GDP growth in first quarter, shaving 3.3% from year-on-year GDP growth, harder than the 2.5-percentage point hit in fourth quarter,” he added.

The PSA will release the latest GDP data on Thursday next week. — Ian Nicolas Cigaral