THE country’s trade deficit in the January-to-July period jumped to a record $22.49 billion due to weak exports, according to the latest data released by the Philippine Statistics Authority (PSA) on Tuesday.
Figures from the PSA showed that the country’s balance of trade in goods in the seven-month period was nearly twice the $13.055-billion trade deficit posted in the same period of last year.
The PSA told the BusinessMirror that the highest cumulative deficit was recorded in 2016, at $15.37 billion. The trade deficit even hit below $3 billion in 2010, according to the PSA.
The largest monthly trade deficit this year was recorded in May, at $3.69 billion. The second largest was recorded in July, at $3.55 billion. Data from the PSA showed that the smallest was recorded in March, at $2.53 billion.
Ateneo Center for Economic Research and Development Director Alvin P. Ang and other local economists earlier said a wider trade deficit is bound to further weaken the peso.
The country’s trade deficit widened on the back of weak exports. Exports only grew 0.3 percent in July but export receipts in the seven-month period contracted by 2.8 percent.
However, the National Economic and Development Authority (Neda) said the country’s trade performance is improving despite the contraction in export revenues in the January-to-July period.
Socioeconomic Planning Secretary Ernesto M. Pernia noted that the country’s total trade grew by 17.5 percent, reaching $15.2 billion in July.
Total merchandise trade reached almost $100 billion in the January-to-July period, 7.7 percent higher than the same period in 2017. This can be attributed to the 15.7-percent cumulative growth in imports, which made up 61.2 percent of total trade.
Trade war
Nonetheless, the government remains concerned about the trade war between the United States and China and views it as a threat to the country’s external trade performance.
The Neda said the trade war between the US and China has resulted in a growing coverage of tariff levies throughout the year, with both countries already imposing an additional 25-percent tariff on $50 billion worth of goods each.
“As the global trade situation becomes less encouraging, improving the overall climate for export development becomes all the more indispensable. Thus, the government needs to fast-track the crafting of the Ease of Doing Business Act’s implementing rules and regulations,” Pernia said.
“Trade war fears have weighed on business sentiment, and we now see softer global activity. With a resolution unlikely in the short term, the dispute is expected to dampen growth in both economies and drag down growth in the wider global economy,” he added.
Pernia said the deterioration in the global economic environment underlines the importance of ensuring that domestic economic fundamentals remain strong.
To boost exports, Pernia said there is a need to “promote forward and backward linkages.” He said this can be done through projects such as the Agribusiness Support for Promotion and Investment in Regional Expositions or Aspire, which integrates marketing development support services to farmers, fisherfolk, and micro, small and medium enterprises, and linking exporters to sources of export financing.
He added that the high cost of domestic and international shipping and cargo handling also needs to be addressed.
“Addressing costs of trade will ensure that imported goods, especially capital and intermediate products, are less expensive and are efficiently utilized in the country’s ‘Build, Build, Build’ program,” he said.
The PSA said the total export receipts recorded by the country’s top 10 market destinations for July reached $4.8 billion, accounting for 82 percent of total exports.
The country’s import bill from the top 10 countries, the data showed, amounted to $7.16 billion, or 76.1 percent of the total in July.
Image credits: nonie Reyes