Domestic trade expected to improve this year

MANILA, Philippines — Domestic trade is seen improving this year on expectations of strong economic activity and continued slowdown in inflation, according to economists.

ING senior economist Nicholas Mapa said trade volume is expected to be healthy this year, with economic activity projected to remain robust.

“So we can expect the volume of trade to improve, while the peso value could also post an increase after the dollar value of imports has likely normalized,” he said in an email.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the decline in global crude oil prices could help further ease the headline inflation rate, which would reduce manufacturers’ input costs and support possible policy rate cuts.

Ricafort said this “would reduce borrowing or financing costs that would support continued pick-up or recovery in domestic trade later in 2024.”

Preliminary data from the Philippine Statistics Authority (PSA) showed domestic trade registered year-on-year declines both in terms of value and volume in the fourth quarter of 2023.

Commodities traded within the country dropped by 52.4 percent to P131.71 billion in the October to December period from P289.57 billion in the same period of 2022.

Domestic trade volume was also down by 48.6 percent to 3.24 million tons in the fourth quarter last year from 6.31 million tons in the same quarter of 2022.

Ricafort said the continued pick-up in prices, although at a slower pace, may have slowed down demand for goods.

He added that the decline in domestic trade could have been partly due to underspending by the government in the fourth quarter, which reduced the movement of raw materials and inputs for various infrastructure projects.

PSA data showed machinery and transport equipment registered the highest share in domestic trade value in the fourth quarter last year with P62.16 billion or 45 percent.

Food and live animals placed second with P31.93 billion (23.2 percent), followed by manufactured goods classified chiefly by material at P11.99 billion (8.7 percent).

When it comes to domestic trade volume, mineral fuels, lubricants and related materials had the biggest share with 0.79 million tons or 24.3 percent of the total in the fourth quarter of 2023.

This was followed by food and live animals with 0.77 million tons (23.8 percent) and machinery and transport equipment with 0.57 million tons (17.5 percent).

Western Visayas had the most favorable or positive trade balance with P10.25 billion in the fourth quarter of 2023, followed by Eastern Visayas with P8.82 billion and Central Luzon with P7.86 billion.

Trade balance refers to the difference between outflow value and inflow value.

On the other hand, regions with the most unfavorable or negative trade balance in the fourth quarter of 2023 are Zamboanga Peninsula with -P18.58 billion, Caraga with -P14.99 billion and Calarbazon with -P5.69 billion.