ANZ sees import growth picking up in 2nd half

MANILA, Philippines — ANZ Research said import growth would pick up in the second half amid the catch up plan on government spending due to the delayed implementation of the 2019 national budget.

Mustafa Arif, economist at ANZ, said import growth particularly capital goods would recover in the second quarter after contracting for four straight months from April to July.

“At the same time, import growth will likely recover in H2 2019 as the government continues with its infrastructure program,” Arif said.

The Duterte administration has earmarked P9 trillion for major infrastructure projects under the Build Build Build program until 2022.

The delayed approval of this year’s budget has prompted the national government to operate on a reenacted 2018 budget in the first four months.

This pulled down the gross domestic product (GDP) growth to a four-year low of 5.5 percent in the second quarter from 5.6 percent in the first quarter.

The GDP expansion averaged 5.5 percent in the first semester, below the six to seven percent GDP growth target set by economic managers through the Development Budget Coordination Committee (DBCC).

“However, the recovery is unlikely to be as quick and as substantial as in the past due to slowing credit growth and an uncertain business environment,” he said.

According to Arif import growth is likely to recover over the next few months contingent on the expected pick up in government spending.

“So far, the pick-up in government spending remains modest and with slowing credit growth, particularly for manufacturing loans, the pace of increase in imports will likely be more moderate than in the past,” Arif said.

Latest data released by the Philippine Statistics Authority (PSA) showed imports contracted by 4.2 percent to $9.57 billion in July from $9.98 billion in the same month last year.

On the other hand, exports went up by 3.5 percent to $6.17 billion from $5.97 billion, translating to a 15.5 percent decline in the country’s trade deficit to $3.39 billion from $4.02 billion.

“Export growth picked up slightly amid a less severe contraction in imports, resulting in a larger trade deficit in July. The weakness in imports has been, in part due to a high base last year, although intermediate goods imports have also been rather weak,” Arif said.

The economist said there are some indications that the country’s export growth is stabilizing.

However, he said the country’s export sector would continue to be hounded by future developments in global trade disputes.