Trade back to growth as imports post unconvincing rebound

Trade back to growth as imports post unconvincing rebound

MANILA, Philippines — Trade was back on positive territory in February after imports snapped nearly 2 years of downtrend on the back of low base effects that hardly reflected a convincing rebound.

What's new

Merchandise trade grew 0.6% year-on-year to $12.91 billion in February, the Philippine Statistics Authority reported Thursday. This was a reversal from 9.4% annual slump chalked up in February.

Broken down, imports grew 2.7% year-on-year in February to $7.6 billion, its first expansion in 21 months led by purchases of raw materials imports that rose 6.4% annually, capital goods (5.7%) and consumer goods (3.9%). 

Exports, however, unexpectedly inched down 2.3% on-year to $5.3 billion after outbound shipments to ASEAN trading partners fell.

With exports down and imports expanding, the trade deficit stayed modest at $2.3 billion, 16.5% wider year-on-year.

Why this matters

While the return to growth is good news, that trade limped to reach this point 7 months since the economy reopened in June last year is telling of the pandemic's lasting impact. Fresh lockdowns in Metro Manila and four key urban areas, which account for over half of the Philippines' economic output, may suspend this rise tentatively, particularly of exports. 

A weak trade reading, would in turn, feed into the first-quarter gross domestic product data scheduled to be released next month.

What analyst say

At least for Nicholas Antonio Mapa, senior economist at ING Bank in Manila, imports is one bright spot that is likely to sustain the uptrend in the next months, but not because a desperate attempt to perk up local demand for imported good is finally paying off.

"Inbound shipment of goods and services will continue to expand in the coming months, benefiting from a favorable base and with manufacturers replenishing depleted inventories," Mapa said in an email.

This essentially means that because last year's drop in imports was so bad, there was a larger ground to recover and post growth. In February 2020, imports dropped 7.3% year-on-year. 

"And although we’ve seen growth in raw materials and capital goods, overall investment activity in the Philippines remains soft with corporates and households postponing expansion activities until the economic outlook improves," he added.

"Meanwhile, exports may face some challenges in the near term with global trade expected to take a hit after select countries reinstate lockdowns to deal with spiking Covid-19 cases in their areas."