MANILA, July 11 – The Philippines posted a trade deficit of USD2.753 billion in May 2017, higher than the USD2.24 billion deficit a year ago. This after imports grew by 16.6 percent last May, higher than the 13.7 percent rise in exports.
PSA data show that metal products, transport equipment and iron and steel represent the highest imports of the country last May. These rose year-on-year by 44 percent, 37.9 percent, and 35.2 percent, respectively.
Economic and monetary officials have traced the strong rise of the country’s imports to rising demand of the Philippine economy.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. said the rise in imports “is actually reflecting potentially healthy conditions.”
“You have to look at what imports are coming in. Capital goods imports support a growing economy. And the economy is growing very strongly at this point in time so this isn’t unusual that imports will be growing,” he said.
On the other hand, the strong growth of imports resulted in the decline of the country’s current account (CA), which refers to the totality of balance of trade (BoT), the net income from overseas and net current transfers.
BSP data show that in the first quarter of 2017, the CA component of the balance of payment (BOP), or the sum of a country’s total transactions with the rest of the world, registered a deficit of USD318 million, which is equivalent of 0.4 percent of the gross domestic product (GDP).
In the same period, BOP posted a deficit of USD994 million, higher than the USD210 million deficit same period in 2016.
Last May, the central bank’s policy-making Monetary Board (MB) slashed the BSP’s 2017 CA assumption to USD600 million deficit from an assumption of USD8 million surplus on account of the strong rise of imports.
The BOP assumption for the year was also cut to USD500 million deficit from USD1 billion surplus previously.
The latest assumption accounts -2 percent of GDP while the previous assumption is at two percent of GDP.
Last May, the BOP registered a USD59 million deficit, bringing the year-to-date level to USD136 million deficit.
Espenilla said the latest trade deficit of the country was “not a surprising outcome” given the impact of what the country bought and sold overseas.
“So again there are pieces of information that you shouldn’t appreciate on a day-to-day basis but you have to look at the underlying factors. That’s what they are driving them,” he added. (Joann Santiago/PNA)
