Expensive imports drive Philippine foreign trade in August

MANILA, Philippines — Foreign trade went up in August due in part to the country's growing import bill, resulting in a wider trade deficit that could add more pressure to the peso and stoke inflation.

The Philippines’ external trade grew 14.8% year-on-year to $18.82 billion in August, data from the Philippine Statistics Authority released Tuesday showed. This was faster compared to the 11.8% annual growth rate in July. 

Broken down, exports slumped 2% year-on-year to $6.4 billion in August. The country’s top export, electronic products, inched down 1.6% annually to $3.7 billion in August. 

Imports grew at a faster clip of 26% year-on-year to $12.41 billion in August on the back of expensive fuel shipments. 

The country’s trade deficit, which occurs when imports bill outgrows export sales, totaled $6 billion in August, higher by 0.21% than the previous month. The trade gap widened 81.3% on an annual basis. 

Sought for comment, Domini Velasquez, chief economist at China Banking Corp., said anemic export sales could persist in coming months. 

“Sluggish global demand will continue to weigh on exports growth while imports are likely to remain elevated as resilient domestic demand push up imports growth. On the other hand, price effects, which were the major driver of imports growth this year, have slowly been dissipating,” she said in a Viber message. 

Velasquez explained that China’s muted economic activity as it embarked on its zero Covid policy could leave exports wilting until next year. PSA data showed that exports to China amounted to $839.18 million in August. 

“For context, merchandise exports during the global financial crisis of 2008-09 fell for 13 consecutive months and another 8 consecutive months in 2011,” Velasquez added.