THE weak Philippine import and export performance in June will likely linger and could worsen until the US-China trade tiff is resolved, according to local economists.
On Wednesday, the Philippine Statistics Authority (PSA) disclosed the country’s export earnings growth inched to 1.5 percent while the country’s import receipts contracted 10.4 percent in June 2019.
Private sector economist Calixto V. Chikiamco told the BusinessMirror the Philippines is already taking a hit from the trade conflict between its two major trading partners.
“What’s disturbing is industrial output shrank in June by 10 percent. US-China trade war is taking a toll on our electronic exports,” Chikiamco said. “Exports will probably decline with the US-China trade war and slowing global economy.”
Chikiamco said the Philippines is not alone, though. Other economies are bound to suffer the same fate as the trade war is expected to slow down the entire global economy.
The National Economic and Development Authority (Neda) admitted as much, saying that the ongoing trade disputes, Brexit-related uncertainties, and rising geopolitical tensions caused the country’s lackluster external trade performance.
Socioeconomic Planning Secretary Ernesto Pernia also admitted in a statement on Wednesday that only 11 (of 38 Neda Board-approved project proposals) out of the 75 infrastructure flagship projects were in the construction phase of implementation.
Pernia lamented that imports continued declining for three consecutive months, with raw material and intermediate goods, and consumer goods posting the biggest contractions at 16.5 percent and 12.8 percent, respectively.
The moderate recovery of exports, Pernia meanwhile said, continued for the third consecutive month. Increased sales of agro-based products, minerals, and manufactures compensated for the decline in outward shipments of petroleum products and other agro-based products.
With this, Chikiamco and University of Asia and the Pacific School of Economics Dean Cid Terosa do not have rosy projections, especially when it comes to the second quarter, which is expected to be below 6 percent.
Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri Jr. and Unionbank Chief Economist Ruben Asuncion see second quarter growth at around 5.8 percent and 5.9 percent, respectively.
Nonetheless, Asuncion said that while this growth is below target, it remains respectable given the current circumstances. Domestic demand is expected to boost the country’s external trade performance in the coming quarters.
Terosa said consumption spending and capital formation could even boost the country’s third-quarter economic performance, owing to low inflation and improved government spending.
“Slowdown in imports may not be related to exports since we suspect it’s the national government which has been behind their import targets,” Neri commented on the country’s weak external trade performance.
However, on a more positive note, Rizal Commercial Banking Corporation (RCBC) Economist Michael L. Ricafort said the slowdown in import receipts growth improved the country’s trade deficit.
PSA reported that the country’s balance of trade in goods (BoT-G) narrowed to a $2.47-billion deficit in June 2019, from $3.55-billion deficit in June 2018.
It was the narrowest trade deficit since March 2018 when it was at $2.34 billion, Ricafort said.
“Narrower trade deficits/net imports among the narrowest/best since March 2018 in recent months [in terms of slight growth in exports and bigger decline imports] would mathematically lead to some pick up/increase in GDP growth in the second quarter of 2019, assuming all other factors are the same,” Ricafort told the BusinessMirror in an e-mail on Wednesday.
Singapore-based JP Morgan Securities economist Shaoyu Guo agreed and said the trade deficit in seasonally adjusted terms narrowed to $2.7 billion.
Guo said given the performance of the country’s exports, they “expect modest export increases in the coming months amid the ongoing external uncertainties around trade.”