Trade deficit narrows in February as virus fears keep factories shut

MANILA, Philippines — A sharp pull back in imports narrowed the Philippines’ trade gap in February, the government reported Wednesday, an indication that coronavirus fears are already crippling the country’s growth engines amid falling demand and tepid economic activity.

Data from the Philippine Statistics Authority showed the country posted a trade deficit of $1.66 billion in the second month of 2020, 39.4% smaller than the $2.73 billion gap recorded a year ago.

Broken down, imports sagged 11.6% year-on-year in February to $7.06 billion on lower purchases of capital goods (-16.18%), raw materials (-8.65%), consumer goods (-9.45%) and mineral fuels (-12.03%), including petroleum crude. Shipments from major trading partner China, where the highly contagious disease emerged last December, fell 43.83%.

On the flip side, exports posted an annual growth rate of 2.8% to $5.4 billion.

A trade deficit means the country imported more goods than it exported during a particular period. It is an indication that the Philippines is shelling out more dollars for shipments in than earning some dollars for shipments going out.

Sought for comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the country’s shrinking trade deficit will likely persist in the coming months as businesses and factories remain shut in the main island of Luzon, which has been placed on a lockdown from March 16 until end-April in a desperate bid to stem the spread of the virus.

Ricafort said crashing global oil prices amid reduced economic activities could cut the Philippines’ oil imports in the next month, helping narrow the country’s trade gap. Worsening port congestion partly due to the lockdown could also slow down imports even more, he added.

But imports of food and other basic commodities could increase in the coming months as people in self-isolation stockpile essential items and work from home, Ricafort also said in a text message.

Meanwhile, exports could also take a hit amid weak demand from virus-battered countries.

“Global crude oil prices continued to sharply declined in March 2020. A sharp decline in oil imports and further narrowing of the trade deficit could still happen starting March 2020,” Ricafort said.