Export sector recovery still unlikely

Despite the weakening peso against the greenback, the road to recovery remains a pipe-dream for exporters as inflation upswing poses new threats to the industry.

“We are now facing several problems. The rise of raw materials, fuel price, and the issue on minimum wage increase, all these combined will give the industry a ‘hard-blow’,” said Cebu Furniture Industries Foundation Inc. (CFIF) president Eric Casas.

In a statement, PhilExport-Cebu executive director Fred Escalona echoed the same sentiments saying, local exporters are already seeing the adverse effects of the strengthening US dollar against the peso, because the foreign exchange gains will only offset their losses from the inflation upsurge.

Due to the continuing rise in the country’s inflation rate brought about by increasing prices of crude oil in the international market, which has soared to as high as US$145 per barrel, the peso’s value has dipped to its 10-month low of P45.50 to the US dollar as of July 4.

Philippine annual inflation surged to 14-year high of 11.4 percent in June, surpassing the central bank’s forecast range of 10.4-11.2 percent.

With the onset of the double-digit inflation, the exporters are also worried with the fragile competitive edge of the Philippines.

According to Casas, furniture exporters for instance are sourcing 70 percent of the raw materials from other countries, “everything is going up,” he said.

Battered by the fierce competition against other countries like Vietnam and Indonesia, Casas said the furniture export sector faces another hurdle as threats of surging inflation will domino into higher cost of business operations, prices of raw materials, and other operational expense.

Meanwhile, Escalona said the spiraling cost of fuel in the market has caused a major setback in the export industry, which is heavily dependent on transportation.

The exporters’ perception of the market will continue to be slow, citing two factors that contribute to economic delay, he added.

One is the general perception that the Philippine economy will maintain a challenging year as traditional markets—US and Japan- are also facing economic slowdown.

For furniture exports on the other hand, Casas said the demand for global furniture is still growing, however, Cebuano furniture makers still have to slowly detach themselves from being overtly dependent to the US market.

Although, there is a projection of slight economic recovery in the United States, Casas said exporters are now very cautious, while anticipating another credit-crunch problem on the onset of the US elections, Casas said.