Philippines: Export growth moderates noticeably in August; import collapse suggests weak domestic demand in Q3
Merchandise exports grew 0.6% in August, down from 3.5% in July. Weaker growth was driven by a slowdown in exports of agricultural goods and manufactured products. In particular, shipments of machinery and transport equipment declined sharply in August, while exports of chemicals, coconut products and bananas also took a beating in the month. On a more positive note, growth in exports of electronic products—which account for more than half of total export revenue—more than doubled July’s result (August: +6.6% year-on-year; July: +3.0% yoy), while gold exports also rose higher in the month.
Imports, on the other hand, contracted for the fifth consecutive month in August, falling 11.8% over the same month a year prior. This was worse than the 4.2% decline registered in July and marked the poorest performance since April 2012. The contraction came on the back of a broad-based drop in imports of raw materials and intermediate goods, capital goods, and consumer goods.
Consequently, the merchandise trade deficit narrowed sharply to USD 2.4 billion in August from the USD 3.6 billion shortfall in August 2018 and also from the USD 3.4 billion deficit recorded in July.
Commenting on the implications for growth in Q3, Nicholas Mapa, Philippines senior economist at ING, notes:
“Sustained import compression signals continued weakness in overall growth momentum for the Philippines. The 2Q GDP disappointment of 5.5% growth […] was due in large part to the contraction in durable goods investment. With the import numbers indicating a sustained pullback in investment machinery, Philippine 3Q growth numbers might exhibit further weakness in capital formation.”