Trade deficit shrinks to $4.2 billion in July

The Philippines’ trade deficit further shrank in July as exports and imports continued to decline, data from the Philippine Statistics Authority (PSA) showed.

The PSA on Friday reported that the country’s balance of trade in goods stood at a $4.20-billion deficit in July, 30% lower than the $6-billion gap in July 2022.

However, the July trade gap was wider than the revised $3.94-billion deficit in June.

July saw the widest trade deficit in two months or since the $4.45-billion deficit in May.

The Philippines has incurred a trade deficit for the last eight years or since the trade surplus of $64.95 million in May 2015.

Merchandise exports fell by 1.2% to $6.14 billion in July, ending two straight months of growth. This was a reversal of the revised 0.9% growth in June but still lower than 4.2% decline in July last year.

July’s export level was the lowest in three months or since the $4.90 billion seen in April.

Meanwhile, imports slumped by 15.3% to $10.35 billion in July, slightly faster than the revised 15% decline in June and a reversal of the 22.3% growth in July 2022.

July marked the six straight month of a decline in imports.

For the January to July period, the trade deficit shrank to $32.18 billion from the $35.84-billion gap a year ago.

In the first seven months of the year, exports fell by 8.2% to $41.09 billion, while imports slipped by 9.1% to $73.27 billion.

The Development Budget Coordination Committee’s exports and imports growth assumptions are set at 1% and 2%, respectively, for this year.

Manufactured goods, which accounted for 82.4% of the country’s total export receipts, rose by 1.6% year on year to $5.06 billion in July.

Electronic products, which made up nearly three-fourths of manufactured goods and more than a half of total exports in July, grew by 7.7% to $3.65 billion.

Almost half of total exports came from semiconductors, which jumped by 18.2% to $3.03 billion.

The United States was the main destination of Philippine-made goods in July. Exports to the US stood at $1.04 billion, accounting for 16.9% of the total exports. Exports to Japan reached $862 million, while exports to Hong Kong stood at $798 million.

Meanwhile, orders of raw materials and intermediate goods in July dropped by 21.9% to $3.71 billion, which made up 35.9% of the total July import bill.

In July, imports of capital goods declined by 3.9% to $3.00 billion, while the imports of consumer goods grew by 5.9% to $2.07 billion.

Mineral fuels, lubricants and related materials fell by 34.4% year on year to $1.53 billion.

China accounted 25.5% of the total imports in July, with a value of $2.64 billion. It was followed by Japan with $865 million and Indonesia with $810 million.

University of Asia and the Pacific (UA&P) Senior Economist Cid L. Terosa said in an e-mail that trade in July was dampened by several external developments.

“They include the collapse of the Ukraine grain deal when Russia opted out, trade restrictions by China, India, and other major trading countries, unstable and weakening peso and, inflationary pressures that have curtailed production, distribution, and consumption activities around the world,” he said.

Mr. Terosa said it will be challenging for the Philippines to meet the trade growth assumptions since global trade is expected to remain weak.

“Also, downgrades to world economic forecasts by major international agencies point to punishing world market conditions ahead. Geopolitical tensions in Europe and Asia as well as rising petroleum prices can temper the usual upbeat global trade mood towards the end of the year,” he added.

Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said in a telephone interview that geopolitical tensions affected the trade performance.

“Our supply chain was disrupted, there are trade constraints due to what is happening abroad. Some trading such as fuels, raw materials, and even basic consumables like rice are having problems, like a slowdown and some orders are being cancelled,” he said.

“I hope this will get better, otherwise, our projection of 6% to 7% growth at the end of the year might revised, at the most of 6%, or 5% or lower than 5%. August will be more or less the same, we are not sure if it slowdown a little or grow, but I think it will be materially difference” Mr. Ortiz-Luis said.

The Philippine economy expanded by a weaker-than-expected 4.3% in the second quarter, its slowest growth in over two years.

For the first half, gross domestic product (GDP) growth averaged 5.3%. However, GDP must expand by 6.6% in the second half to be able to achieve the government’s 6%-7% full-year target. — Lourdes O. Pilar

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