Phl relies on electronic exports heavily

CEBU, Philippines - According to the Institute for Development and Econometric Analysis, Inc. (IDEA) latest Economic Trends, it is becoming clear that the effects of the global financial crisis in 2008/2009 and the on-going euro-crisis in the West will not subside any time soon.

Foreign trade has grown a great deal in the Philippines in the past 20 years. From Php 939.760 billion (in constant 2000 prices) in 1991, the total import bill as of 2010 was Php 2,884.280 billion. For exports, it was Php 933.131 billion in 1991 and Php 2,886.133 billion in 2010.

These figures represent a compound annual growth rate (CAGR) of 6.08 percent and 6.12 percent for imports and exports, respectively. Average growth rates for imports and exports exceeded those of the gross domestic product and gross national income, which were only 4.04 percent and 5.53 percent, respectively, for the same period.

Furthermore according to IDEA, this is important to us because the United States is the largest market for our electronic products, which are our top export commodity. Moreover, it has been said that our export commodities and markets are highly concentrated that we don't have a sufficient hedge against external volatilities. With these, it is important to re-examine our country’s dependence on the West as an export market and the electronic products as an export commodity.

Likewise, per same published report, a closer look at the export data reveals the sources of the diversification in our export products. Undoubtedly, electronic products remains the sole biggest export commodity group although its share of total exports is at its lowest for the past seven years to 2012 at 52.6 percent.

The second highest merchandise exports in terms of share to total is articles of apparel and clothing, which comprises only 3.5 percent of total exports. Figures will illustrate the sources of diversification using the March data on exports of electronic products and selected high growth export products.

As a result of the global financial crisis, demand for electronic products in the west slowed down resulting in a drop in electronics exports in 2008 and stagnant exports for the past five years. The worst export figures were in 2009 when almost all our major exports except gold and tuna decreased as a result of the global financial crises. As a consequence, while they comprised 66.4 percent of our total exports in 2005, electronic products only comprised 52.6 percent in 2012. For the past seven years, the CAGR of electronics exports was only 0.6 percent while that for total exports was 4.0 percent.

While our exports of electronic products have been stagnant for the past five years, there have been some export commodities where growth has been very rapid. Compared to the CAGR for electronic products and total exports, the CAGRs in these export products range from 8.9 percent (Bananas) to as high as 27.8 percent (Tuna).

Moreover, the growth in some of these industries hasn’t been completely smooth but has rather been characterized by violent swings such as the ones observed in coconut oil and petroleum products. Interestingly, our exports of gold seemed to have greatly increased during the times that the global economy was not doing well as minerals like gold are considered as safe havens for investment. Data will show the CAGRs for the past seven years of the export commodities discussed as well as for total trade using March data and their percentage share in total exports in 2005 and 2012, according to the researchers of IDEA.

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