Philippines’ trade deficit expanded to US$5.6 billion for January to September 2015 compared to US$1.8 billion deficit in the same period last year.
The National Economic and Development Authority (NEDA) has attributed the increase in trade deficit to the 24.7 percent decline in merchandise exports recorded in September 2015, the largest contraction since September 2011.
“On the back of sluggish global growth, economic policies should continue to encourage investments that cater to domestic demand. Continuous improvements in product quality, innovation and infrastructure support to local industries should be sustained in order to elevate the competitiveness of the domestic industries, and make them at par with imported products,” says Economic Planning Secretary Arsenio Balisacan.
“Local industries can also take advantage of the lower prices of commodities in order to beef up inventory and expand capacity. At the same time, the purchasing power of consumers, especially the poor, needs to be strengthened,” says Balisacan.
Imports increased by 6.7 percent to US$6.2 billion in September 2015 from US$5.8 billion in the same month last year.
Balisacan says the upbeat sentiment from the business sector and an overall improvement in consumer expectations for the coming quarter would likely keep imports afloat, especially in the manufacturing and construction sectors.
“Improved purchasing power due to low inflation will also keep consumer demand vibrant in the succeeding months, and will further be ramped-up by holiday spending,” says Balisacan.
“The 40.7% growth registered in capital goods for September which is the highest for the year, is also an indication of robust economic activity moving forward.”
Imports of capital goods increased to US$2 billion from US$ 1.4 billion in the comparable period last year. Raw materials and intermediate goods also increased by 20.1 percent in September 2015 to reach US$2.7 billion compared to US$2.2 billion recorded in the same month last year.
Raw materials and intermediate goods serve as inputs in the production of final goods, while capital goods include equipment and materials in which firms invest to expand production and make production more efficient.
Import bills for consumer goods grew by 10.1 percent to US$876.8 million in September this year from US$ 796.4 million in September 2014, mainly on higher purchases of durable goods particularly of passenger cars and motorized cycle.
However, payments for non-durable goods, primarily rice, registered a decrease during the period because of lower rice volume purchased on a year-on-year basis.
“The drop in rice imports may only be temporary as the government allowed for additional rice imports in the fourth quarter of the year given the prevailing El Nino, which is still affecting domestic rice production,” says Balisacan.