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Exports returned to negative territory in October, while imports maintained a double-digit decline for the ninth consecutive month, which economists said reflected the Philippines’ slow economic recovery from the pandemic-induced recession.
Latest preliminary data from the Philippine Statistics Authority (PSA) on Thursday showed October merchandise exports contracted 2.2 percent year-on-year to $ 6.2 billion, reversing the 2.9 percent growth recorded in September.
Imports fell 19.5 percent faster year-on-year to $ 7.98 billion compared to a 15.3 percent drop in the previous month.
Two-way foreign trade in October declined 12.8 percent year-on-year to $ 14.18 billion, a larger contraction than the 8.2 percent in September.
Due to falling imports, the goods trade deficit narrowed further to $ 1.77 billion from $ 1.78 billion a month ago and $ 3.57 billion a year ago.
In a note to clients, ING Philippines senior economist Nicholas Antonio Mapa explained that “exports remained weak due to moderate global demand, while imports were in free fall, for 18 consecutive months with the economy in recession”.
“Rapidly fading domestic demand coupled with negative investment sentiment forced imports to fall at a double-digit rate for the ninth month in a row, and capital goods, a leading indicator of productive capacity, fell by 19, 1 percent. As inbound shipments of capital machinery fading rapidly, we forecast a slow and arduous recovery for the Philippine economy given the likely impact on potential production, ”said Mapa.
“A substantial drop in consumer goods (negative 21.8 percent) reflects the difficulties of domestic demand, with the Philippines registering a third quarter of negative growth,” added Mapa, referring to the average contraction of 10 percent in the gross domestic product (GDP). in the first nine months.
For Mapa, “current trends in anemic exports and imports in free fall [would] continue through early 2021 with mediocre global growth and domestic demand to start the year. “
“Despite initial optimism stemming from the development of the vaccine, we believe that the deployment of the vaccine will not be instantaneous, especially in the Philippines, where authorities have yet to secure a single dose of the vaccine. The absence of vaccines and a projected slow implementation (three to five years according to official government estimates) will weigh on national economic activity and restrict any potential recovery in investment appetite. Therefore, we expect import demand to recover, but on a very shallow trajectory, which will lead to a very gradual and slow recovery for the Philippines, as it operates with a diminished productive capacity, ”said Mapa.
Acting Secretary for Socio-Economic Planning Karl Kendrick Chua said in a statement that he still found positive developments from the October trade data.
Chua noted that “merchandise exports to our main regional trading partners, such as China and Asean, grew in double digits.”
“In addition, imports of capital goods increased in October compared to September, suggesting that commercial activities have been responding to the government’s approach of selective and gradual reopening and greater mobility,” added Chua, who heads the National Authority for Development and Economics of the state planning agency.
However, Chua reiterated the need to further open the economy in a gradual and safe manner to accelerate not only trade but also the overall economic recovery. INQ
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