Philippine trade gap widens in May

MANILA, Philippines — The country’s trade deficit expanded in May as imports continued to outpace exports on the back of higher prices of oil and other commodities from overseas due to the ongoing Russia-Ukraine conflict, and increased demand for raw materials with the further reopening of the economy.

Preliminary data released by the Philippine Statistics Authority (PSA) yesterday showed the trade gap surged by 78.6 percent to $5.68 billion in May from a $3.18-billion deficit in the same month last year.

The trade deficit in May is also higher than the $5.35 billion trade shortfall in April.

Imports of the country rose by 31.4 percent to $11.99 billion in May from $9.12 billion in the same month a year ago.

Meanwhile, the country’s exports grew by just 6.2 percent to $6.31 billion from $5.94 billion.

“Exports rose modestly, while imports continued to surge, driven by a bloated fuel import bill and increased demand for raw material and capital goods due to the economic reopening,” ING senior economist Nicholas Mapa said in an email.

He said the country’s exports posted modest growth as global trade slowed due to recession fears.

The country’s imports of mineral fuels, lubricants and related materials, which accounted for an 18.8 percent share in the total for the month, jumped by 128.7 percent to $2.26 billion in May from $986.81 million  last year.

Other imports that posted year-on-year increases in May were electronic products, which went up by 12.7 percent to $2.78 billion, and transport equipment, which climbed by 51 percent to $908.95 million.

In terms of outbound shipments, electronic products remained the country’s biggest export in May with a 55 percent share and total earnings rising to $3.47 billion this year from $3.43 billion in the same month last year.

Other top exports for the month were mineral products with a 5.7 percent share and value of $357.25 million, and other manufactured goods, which had a 4.8 percent share and amounted to $305.57 million.

From January to May, the trade gap ballooned to $24.92 billion compared to the $14.62 billion trade deficit in the same period a year ago.

The country’s imports for the first five months of the year amounted to $56.8 billion, 29 percent higher than the $44.02 billion recorded in the same period last year.

As of end-May, the country’s exports increased by 8.4 percent to $31.87 billion from the previous year’s $29.4 billion.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the further reopening of the economy could lead to continued increase in both imports and exports.

He said the increase, however, may be offset by slower economic recovery prospects due to the Russia-Ukraine conflict and higher US or global interest rates or bond yields amid more aggressive rate hikes or monetary tightening to better manage inflation.

“Trade deficit could sustain at the $4 billion to $5 billion levels per month, among record levels, for as long as global oil or commodity prices remain elevated,” he said, adding this may be offset by any reduction in demand.

Mapa also said high oil prices are seen to keep the country’s trade balance in deep deficit for some time, and may fan inflationary pressures in the coming months.

He said a wide trade deficit is expected to lead to weaker currency in the near term.

“Although the Philippines may not face an outright recession, we do see scope for growth momentum to slow considerably in the second half of the year,” Mapa said.