Philippines: Merchandise exports contract in October, imports continue to plummet
Merchandise exports ticked down 2.2% annually in October (September: +2.9% year-on-year). Meanwhile, merchandise imports plummeted 19.5% over the same month last year in October (September: -15.3% yoy), as soft sentiment and lingering restrictions weighed on domestic demand. Imports of capital goods fell particularly sharply, boding poorly for the economy’s productive capacity ahead.
As a result, the merchandise trade balance recorded a USD 1.8 billion shortfall in October (September 2020: USD 1.8 billion; October 2019: USD 3.6 billion deficit). Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a USD 24.5 billion deficit in October, compared to the USD 26.3 billion deficit in September.
Regarding the outlook for the external sector and the peso, Nicholas Mapa, senior economist at ING, comments:
“We expect the current trends of anaemic exports and freefalling imports to continue into early 2021 with both global growth and domestic demand lackluster to start the year. Despite early optimism derived from vaccine development, we believe vaccine deployment will not be instantaneous. […] Thus we expect import demand to recover but at a very shallow trajectory—leading to a very gradual and slow recovery for the Philippines as it operates with diminished productive capacity. The ongoing trends in trade will also translate into near-term support for PHP as corporate dollar demand remains light, with the peso forecast at 48.25 by year end with an appreciation bias going into 2021.