AN industry leader on Monday appealed to the government to act fast in resolving the country’s declining export performance, as the sector is feeling the pang of global trade uncertainty.
Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc., said the trade war between the United States and China has been prompting hesitation among several exporters. The protectionist policies being taken by the world’s largest economies, he argued, compelled exporters to stick to providing for the domestic market.
“Everybody knows that one of the issues is trade war. While it should not affect us directly, it becomes self-fulfilling because people are afraid of it,” Ortiz-Luis said in an interview with the BusinessMirror.
“Exporters of agricultural products, in spite of the fact that export figures went down, some of them stuck to [supplying] the domestic [demand],” he added. Exporters apparently saw that supply in the local market is running low, so they decided to take advantage of the situation, which, Ortiz-Luis admitted, is to the detriment of the country’s export performance.
Export receipts in May amounted to $5.76 billion, down by 3.77 percent from $5.99 billion during the same month last year, according to data from the Philippine Statistics Authority. Moreover, this was the fifth consecutive month that figures declined year-on-year, with the export sector yet to post positive growth throughout the year.
Exporters, still, are optimistic they can bounce back, as they are heavily banking on the approaching holiday season to rebound them from their slow performance in the first semester, Ortiz-Luis explained.
This positive outlook was shared by Senen M. Perlada, director of the Department of Trade and Industry’s Export Marketing Bureau. He said the weakening peso—a competitive advantage exporters enjoy—as well as the growing demand from traditional export destinations, and even the trade war, could push the export sector to recover in the second half of the year.
“On the upside, I am quite confident that, [in the] second semester, merchandise exports will rebound. The exchange rate is more favorable to Philippine merchandise exports,” Perlada told the BusinessMirror.
“There is also more robust demand from traditional consumer markets, such as the US, European Union, Japan and now China. In the very short run, the so-called trade war between [China and the US] could possibly benefit the Philippines in the sense that the dislocation of supply, say, agricultural products of the US to China, could translate to bigger demand for Philippine fruits going to China,” he added.
Perlada, however, warned that should the trade war be protracted, the Philippines, like any other economy, will certainly be at the short end of the stick. “But in the long run, the trade war, especially an expanded and prolonged one, which will go against globalization, will not benefit any country,” he made clear.
Inflation, or the general increase in commodity prices, could also temper whatever growth the holiday season presents to exporters.
“On the downside, I have also heard feedback that domestic inflation is already eroding whatever competitiveness the Philippine currency depreciation is offering to our exporters. If creeping inflation persists, that again may dampen second-semester exports,” the trade official added.
June inflation soared to 5.2 percent, higher than the 2.5 percent recorded during the same month in the previous year and the 4.6 percent in May. With this, headline inflation now stands at 4.3 percent after the first semester.
Ortiz-Luis, for his part, called on the government to take necessary action that will cushion the impact of domestic and global uncertainties surrounding the export sector. For one, he wants lawmakers to immediately renew the Magna Carta for Micro, Small and Medium Enterprises (MSMEs), which is scheduled to lapse this year.
He also reiterated his call to the government to divert at least 20 percent of the funding for the conditional cash transfer program to MSME interventions. On top of this, the industry leader urged this administration’s economic team to find ways to simplify loan applications in banks to make financing more accessible to small enterprises.
Image credits: Alysa Salen