Trade gap narrows in October as imports continue to fall

MANILA, Philippines — The Philippines’ trade deficit narrowed in October as exports slightly grew while imports contracted, the country’s statistics agency reported Tuesday.

The country’s trade gap stood at $3.35 billion in October, 26.4% smaller than $4.42 billion deficit recorded in the same month last year.

Broken down, exports managed to eke out growth, up 0.1% to $6.32 billion while imports fell for the seventh month by 10.8% to $9.57 billion.

“The Philippines trade gap has narrowed in 2019, largely due to import compression while exports have managed to stay afloat amidst the ongoing trade war,” said Nicholas Mapa, senior economist at ING Bank in Manila.

The Philippines has been incurring wide trade gaps since 2017 amid a rise in imports to feed the Duterte administration’s ambitious infrastructure program, reversing the nation’s current account surplus to a deficit and pressuring the peso.

But a four-month delay in the approval of the 2019 budget — which left new projects unfunded earlier this year — disrupted public infrastructure spending, slowing down imports in recent months and helping improve the nation’s trade imbalance.

“In the short term, the Peso will continue to enjoy an appreciation bias on holiday remittance flows and the narrowing trade gap.  However, increased demand for foreign currency coupled with a projected easing from the Bangko Sentral ng Pilipinas in February 2020 will likely see an end to the recent strengthening bias for PHP as early as 1Q 2020,” Mapa added. — Ian Nicolas Cigaral