External merchandise trade rose for the 12th straight month in January, but a sustained surge in imports that outpaced exports widened the Philippines’ trade deficit, putting further pressure on the peso to weaken further through against the US dollar.
The Philippine Statistics Authority’s (PSA) latest preliminary report on foreign trade performance released on Friday showed that the value of January’s combined exports and imports rose 20.1% year-on-year to 16.8 billion, reversing the 9% decline a year ago.
Shipments of Philippine-made products abroad rose 8.9% year-on-year to more than $6 billion, a reversal from a 4.4% decline in the same month of the year last.
In a report, Pantheon Macroeconomics’ senior economist for Asia, Miguel Chanco, said the Philippines’ semiconductor exports were “finally showing signs of life.”
“The current pace of year-over-year export growth in the Philippines is about right when you strip out the Lunar New Year noise. A fourth consecutive monthly improvement is likely in February. month-on-month in January focused primarily on non-electronic goods, with electronics exports continuing to gain momentum in the fourth quarter of 2021. month, building on the 5% jump in December,” said Lucky.
Meanwhile, imports jumped 27.5% faster year-on-year to $10.7 billion last January, reversing the 11.8% drop from the previous year.
“Imports of consumer goods suffered a sharp correction, throwing some cold water on the relatively benign January net sales report, which showed only a small direct hit from the Omicron wave. Reassuringly, capital goods purchases are holding up relatively well,” Chanco said.
“Capital goods, raw materials, consumer goods, fuels and minerals all posted sizable gains for the month as the economy gradually reopens after months of restrictions,” the senior economist said. of ING in the Philippines, Nicholas Mapa, in a separate report.
However, as imports exceeded exports, the goods trade balance remained in deficit in January, which at $4.7 billion was 63.2% higher than the monthly gap a year ago. year, but lower than the record deficit of $5.3 billion last December.
Although a narrower gap, the persistent trade deficit at the start of this year “probably also kept the current account balance in deficit territory,” Mapa said. A current account deficit, reflecting more US dollars flowing out of the economy, weakens the Philippine peso. The national currency slipped to the $52:1 level this week.
“[January’s] The $4.7 billion trade deficit is already well above the pre-COVID-19 average of $3.5 billion. In the coming months, we expect the trade deficit to continue to widen, especially with the oil import bill expected to swell due to high crude prices. The fuel import bill could rise from $1.4 billion to $2.1 billion due to the global price of crude, leading to a further deterioration in the overall trade deficit,” Mapa said.
“A wider trade gap leads to a depreciation of the peso, which is down 2.4% for the year. More expensive energy and a weaker currency will likely result in faster inflation in the near term despite central bank expectations that inflation will remain within target for the year. We will have to revise our inflation projections and an overshoot of the inflation target cannot be ruled out at this stage,” Mapa added. The Bangko Sentral ng Pilipinas (BSP) had forecast an average inflation rate of 3.7% in 2022, within the target range of 2-4% manageable price increases conducive to economic growth. The BSP had nevertheless conceded that the second quarter could see monthly breaks in the headline rate due to expectations of high food and oil prices due to the war between Ukraine and Russia.
In a March 10 report, the Washington-based Institute of International Finance estimated that sharp increases in oil and wheat prices would worsen the Philippines’ current account deficit.
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