Outlook turns glum as trade deficit widens in March

MANILA, Philippines — The country’s trade deficit continued to widen in March, as exports and imports retreated which an analyst thinks is a sign of growth momentum struggling for the rest of 2023.

Data released by the Philippine Statistics Authority on Tuesday showed that the trade deficit expanded 7.5% year-on-year to $4.93 billion in March. A trade deficit occurs when the country’s import bills outgrow export sales.

The March shortfall was wider compared to the $3.9 billion recorded in the preceding month.

Overall, the country’s external trade contracted 5.1% on-year to $17.9 billion in March. This was, however, a better showing compared to $14.06 billion tallied in February.

Data broken down showed exports slumped, contracting 9.1% on-year to finish March at $6.5 billion. The country’s top export, shipments of electronic products, tumbled 12.1% on an annual basis to $3.48 billion.

Imports faced a similar fate in March, retreating 2.7% on-year to $11.45 billion.

For Miguel Chanco, Pantheon Macroeconomics chief economist for emerging Asia, trade is in for a rough ride in 2023.

"The ongoing evaporation in upward momentum in domestic demand bolsters our conviction that private consumption is in for a difficult year this year, with its slowdown likely to drag headline GDP growth down to 4.5%, from 7.6% in 2022,” he said in an emailed commentary.

Chanco homed in the point that headwinds, such as rising inflation and interest rate hikes meant to temper it, will be linger in 2023. Just as well, he pointed out that the leaps seen in household borrowings and remittance growth will not make a comeback this year.

Domini Velasquez, chief economist at China Banking Corp., found some bright spots for trade as she expects some the deficit to narrow in the coming months.

“Base effects from higher oil prices last year should be more pronounced in April to June,” she said in a commentary.

While trade is expected to stay in deficit territory for the rest of the year, the levels won’t hit 2022 levels. For context, the country’s trade gap expanded 22% on-year to $58.3 billion last year.

“The latest exports figure points to a possible early recovery as Chinese demand picks up,” Velasquez added.