Trade shows resilience during lockdown with August growth

MANILA, Philippines — Foreign trade sustained a double-digit growth in August, with both exports and imports recording expansion as demand proved resilient despite stringent curbs back then.

What’s new

External trade grew 25.3% year-on-year to $16.51 billion in August, the Philippine Statistics Authority reported Tuesday. This was faster than the 22.9% annual growth rate in July, and a turnaround from 15.6% contraction posted a year ago.

Data showed exports sustained their momentum as they expanded 17.6% year-on-year to $6.47 billion in August, marking its sixth straight month of growth. Imports advanced at an annualized rate of 30.8% to $10.04 billion in August.

In turn, the Philippines’ trade deficit, which occurs when imports bill exceed export sales, amounted to $3.58 billion in August, 2.2% smaller than the previous month. But on an annual basis, the trade gap widened 64.1%.

Why this matters

Trade on the mend is a welcome development as the country looks to bounce back from a historic economic meltdown induced by the pandemic.

That said, the Bangko Sentral ng Pilipinas projects export of goods to inch up 14% this year. Imports, meanwhile, are forecast to improve 20%.

A recovery in imports, which accounted for 60.8% of the Philippines’ external trade in August, could be a sign of improving consumption conditions.

What analysts say

For Jun Neri, lead economist at the Bank of the Philippine Islands, imports have the potential to return to pre-pandemic level by the end of this year if improvements in local demand can be sustained.

On the flip side, surging imports would pressure the peso.

“Strength of domestic demand is evident in both the July and August prints, which despite strict quarantine measures were north of $10 billion each month. By yearend, we are likely to hit 100% of 2019 imports level as reopening is likely to be uninterrupted through December,” Neri said in a Viber message.

“Good thing we have hefty exports and remittances to help prevent a massive depreciation of the peso resulting from a sharp growth in foreign borrowings and continuous depletion of our gross international reserves,” he added.

Miguel Chanco, senior Asia economist at Pantheon Economics, agreed with Neri. "Today’s data add to the body of evidence showing that domestic demand was largely spared by the brief reimposition of the strictest anti-Covid curbs in August, and that it was hit more badly by the initial acceleration in Delta cases in the previous month," Chanco said in a commentary.

Other figures

• Sales of electronic products, the country’s top exports, amounted to $3.69 billion in August, up 16.5% year-on-year.
• Fuel shipments, which grew 116.2% year-on-year in August, were the main driver of growth in total imports bill during the month.