Robust exports to improve Philippines growth trajectory

MANILA, Philippines — The projected expansion of exports may further improve the Philippines’ growth trajectory as the policy normalization of the world’s major central banks is expected to lead to increased global trade.

During the 16th JP Morgan Philippine Conference 2022,  Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the policy normalization by major central banks, including the US Federal Reserve,  would provide opportunities for economies like the Philippines in terms of increased trade activities.

“We expect the Philippine economy’s growth trajectory to improve further owing to the projected expansion of exports in 2022,” Diokno said.

The Philippine Statistics Authority (PSA) said the country’s merchandise exports increased by 17.5 percent to an all-time high of $74.64 billion last year from $65.21 billion in 2020 amid increased global trade.

However, imports zoomed  by 31 percent to a record $117.78 billion in 2021 from $89.81 billion, reflecting increased economic activities with the easing of COVID  mobility restrictions.

This translated to a record trade deficit of $43.13 billion last year, 75.4 percent wider than the $24.6 billion in 2020.

Diokno attributed the 16 percent increase in   exports   to the recovery in demand from the country’s major trading partners.

The BSP chief said electronic products accounted for more than half of the country’s total exports.

“And we expect exports of electronic products to increase as demand for semiconductors and other electronic components rises due to more extensive global digitalization efforts across multiple sectors,” he said.

Also lending support to the improved export outlook, Diokno said, are higher commodity prices in mineral and agro-based products, and an increase in domestic production capacity.

According to the BSP chief, the normalization of the presently highly accommodative monetary policy in advanced economies is expected to cause a rebalancing of global capital flows and depreciation of emerging markets’ currencies vis-à-vis the dollar.

Diokno said the effect of such a move could potentially affect all emerging economies, but would be uneven on each individual economy.

“Our assessment is that the Philippines is in a favorable position to navigate this tightening of global financial conditions given its manageable inflation environment and sufficient external buffers,” he said.

The country’s gross international reserves (GIR) stood at about $109 billion in 2021, more than sufficient to withstand adverse external shocks.

Likewise, Diokno said structural flows, including remittances from overseas Filipino workers, business process outsourcing, and foreign direct investments (FDIs), would further boost the country’s external payments position.

He said the central bank’s market-determined exchange rate system and macroprudential measures would continue to curb excessive foreign exchange volatility and help maintain order in the financial markets.

Economic managers see a faster gross domestic product (GDP) growth of seven to nine percent this year from 5.6 percent last year.