Think tank sees widening trade gap

Lawrence Agcaoili (The Philippine Star) - February 16, 2020 - 12:00am

MANILA, Philippines — Barcelona-based Focus Economics sees the country’s trade deficit further ballooning over the next two years after narrowing last year as the growth in the importation of capital goods and raw materials will continue to outpace that of exports.

Lindsey Ice, economists at FocusEconomics, said the country’s trade shortfall would widen to $45 billion this year and further to $51.8 billion next year.

Ice said imports would increase by 5.2 percent in 2020 and 8.9 percent in 2021, faster than the projected rise in exports at 3.8 percent and 8.4 percent, respectively.

The country’s trade gap narrowed by 14.9 percent to $37.05 billion last year due to soft global markets amid the US-China trade war.

Data from the Philippine Statistics Authority (PSA) showed imports contracted by 4.8 percent to $107.37 billion last year while exports inched up by 1.5 percent to $70.32 billion.

 For the month of December alone, the country’s trade deficit grew by 40.6 percent to $2.48 billion. 

Imports contracted for the ninth straight month, shedding 7.6 percent to $8.22 billion in December while exports increased by 21.4 percent to $5.74 billion.

The country’s gross domestic product (GDP) growth slowed down to an eight-year low of 5.9 percent last, short of the government’s six to 6.5 percent target, due to soft global markets, the tightening cycle by the Bangko Sentral ng Pilipinas (BSP) and the delayed implementation of the 2019 national budget.

Inflation, on the other hand, eased to 2.5 percent last year from 5.2 percent in 2018 due to cheaper oil and rice prices as well as a stronger peso.

 The benign inflation environment and slower than expected GDP growth allowed monetary authorities to slash interest rates between May and September last year, partially unwinding a tightening episode that saw rates jump by 175 basis points in 2018.

The central bank’s Monetary Board slashed interest anew by another 25 basis points last Feb. 6 as a preemptive move to boost market confidence and ward off potential spillovers of external headwinds such as the outbreak of the novel coronavirus (COVID-19).

Economic managers have penciled a GDP growth rate of between 6.5 and 7.5 percent for this year.

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