Philippines' Trade Deficit Slightly Widens to $4.6 Billion in May

According to the Philippine Statistics Authority, the country's trade deficit slightly increased to $4.6 billion in May. Both exports and imports experienced annual declines, with exports down 3.1% and imports decreasing by 0.03%.

Philippines' Trade Deficit Widens Slightly to $4.6 Billion in May Amid Declining Exports and Imports

The statistics agency reported Wednesday that the trade gap between the Philippines and other countries marginally increased in May, as exports and imports experienced annual declines, according to BusinessWorld.

The Philippines' trade-in-goods balance, which is the difference between exports and imports, was $4.601 billion in May, according to preliminary data from the Philippine Statistics Authority (PSA). This deficit is slightly larger than a year ago's $4.4 billion imbalance.

Nevertheless, the trade deficit in May decreased from $4.73 billion in April.

“The modest narrowing of the trade deficit was exactly in line with our expectations and was driven primarily by an unwinding of adverse export and import seasonal effects,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said in an e-mailed note.

From January to May, the trade deficit decreased by 13.08% to $20.59 billion, a decrease from the $23.69 billion imbalance the previous year. Since the $64.95-million surplus in May 2015, the country's trade balance in goods has been negative for 108 consecutive months, or nine years.

According to PSA data, exports decreased by 3.1% to $6.33 billion in May from $6.53 billion in the same month a year ago. In April, exports increased by 0.6% monthly from $6.29 billion.

Despite the decline, it may experience the highest export value in seven months since October 2023, when it reached $6.52 billion. Exports have increased by 7.81% annually to $30.84 billion year-to-date.

In May, the weaker peso against the US dollar was advantageous for exports, according to Michael L. Ricafort, Chief Economist of Rizal Commercial Banking Corp.

For the first time in 18 months, or since November 2022, the peso plummeted to the P58-per-dollar level in mid-May. As of the end of May, the peso had depreciated by P0.94 from its P57.58 closing price in April, reaching P58.52 against the dollar.

Philippines' Imports Slightly Decline in May, Exports of Electronics and Mineral Products Drop

According to PSA data, imports decreased by 0.03% to $10.929 billion in May from $10.93 billion a year ago and by 0.8% from $11.02 billion in April. During the initial five months, imports declined by 1.66% to $51.43 billion.

“Imports were flat in year-on-year terms, and down only slightly in US dollars from April, resulting in a less favorable deficit than we had been hoping to see. However, the net result of no change in the deficit was in line with expectations and should have no substantial or lasting consequences for the Philippine peso,”Robert Carnell, regional head of research, Asia-Pacific at ING Economics, said in an e-mail.

The Development Budget Coordination Committee anticipates a 5% and 2% increase in exports and imports this year.

PSA reported that manufactured products accounted for 80.3% of total exports in May and experienced a 3.5% decline to $5.08 billion from $5.27 billion in the previous year.

In May, the export of electronic goods, which comprised over half of manufactured products, decreased by 5.1% to $3.56 billion from $3.75 billion a year prior. In May, semiconductor exports decreased by 13.3% to $2.75 billion.

“By major component, electronic exports, which make up the lion’s share of the Philippine export basket, were fractionally lower than the previous month, but nothing to be alarmed by. There were also some better figures for manufactured exports,” Mr. Carnell said.

In May, mineral product exports, which comprised 10% of the total exports, decreased 8.4% to $633.63 million.

In May, the United States was the primary destination for Philippine-made products, with exports valued at $1.08 billion, or 17% of the total.

In April, Hong Kong was the top export destination; however, in May, its exports were valued at $904.79 million, or 14.3% of the total. This resulted in a decline to second place. Japan ($882.7 million, or 13.9%) and China ($847.12 million, or 13.4%) succeeded.

“By country, exports to Mainland China remain weak, falling by 9.1% year on year, but imports to Hong Kong are holding up much better and these are probably destined for Mainland China too,” Mr. Carnell said.

Mr. Chanco noted that shipments to other markets were stable, if not slightly up monthly.

“Overall export momentum has ebbed in recent months, but the sturdy year on year performance of exports in Korea — a bigger player in semiconductors — suggests that Philippine export growth should bounce in the short run,” he said.

Philippines' May Trade: Imports Rise for Raw Materials, Drop for Capital Goods, China Leads Source

In May, Philippine exports to South Korea valued $265.23 million.

According to PSA data, imports of raw materials and intermediate products in May, which constituted 37% of the total imports, increased by 0.6% to $4.09 billion.

Imports of capital goods, which accounted for 25.6% of the total, decreased by 11.5% to $2.8 billion, while imports of consumption goods increased by 0.4% to $2.14 billion.

The top three commodity classes in terms of import value were electronic products ($2.15 billion), mineral fuels, lubricants, and related materials ($1.85 billion), and transport equipment ($891.7 million).

China was the primary source of imported products in May, accounting for $2.73 billion or 25% of total imports.

This was succeeded by the United States ($748.19 million or 6.8%), Indonesia ($972.15 million or 8.9%), and South Korea ($989.6 million or 9.1% of the total).