Trade slumps early with imports down for 21 months

MANILA, Philippines — Trade lost its recently found momentum in January, with exports reverting back to negative territory and imports languishing in the red for the past 21 months.

Total trade reached $13.4 billion at the first month of 2021, down 11.1% year-on-year, the Philippine Statistics Authority reported on Friday. 

On a monthly basis, the value of all shipments also decreased from $13.8 billion in December when the holidays nudged trade up from a pesky slump that proliferated for most of 2020 due to lockdowns and travel barriers.

The latest report provides another evidence of a grueling climb out of a pandemic slump. When broken down, the data further points to continued weakness of demand in and out of the country, derailing a crucial rebound projected for this year.

More specifically, imports still disappointed having dropped for 21 straight months now decreasing 14.9% annually to $7.91 billion in January. On top of that, the decline was deeper than previous month’s 8.2% which at the time was thought to be the start of a swing back to growth.

A fresh import decline signals consumer demand has not materially gained pace to prod traders to bring in more goods, suggesting a bleak economic outlook. Indeed, the value of consumer goods sank 12.9% year-on-year to $1.41 billion.

“The ongoing slump in imports suggests that growth pains for the Philippines will be around for some time…,” Nicholas Antonio Mapa, senior economist at ING Bank in Manila, said in a commentary.

To make matters worse, capital goods imports also shrunk 14.8% from year-ago levels to $2.59 billion, while their raw materials counterpart also slumped 9.2% to $3.2 billion— both critical indicators of the pace of state infrastructure spending, which have buoyed growth before pandemic time.

When the health crisis happened, the Duterte administration refused to give up infrastructure funds over belief its ambitious “Build, Build, Build” infrastructure agenda would save the day for the economy, only to get derailed by quarantines, delayed by travel restrictions that prevented consultants to fly in, and hampered by workers' inability to reach construction sites without public transport.

Without fiscal push, large investments from the private sector also did not materialize. “Relatively slower imports compared to a year ago and vs. pre-COVID-19 levels still reflects… businesses/industries still operate below the usual capacity,” Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said in a commentary.

As to exports, shipments went down 5.2% year-on-year to $5.49 billion, halting 2 straight months of expansion, data showed. Among top 10 products shipped out, six grew led by chemicals that surged 50.6%, metal components (15.3%), and ignition wiring and other wiring sets (13.6%). 

Four, meanwhile, were still in the red. These were bananas whose value shrank 46.9%, other manufactured goods (-12.8%), machinery and transport equipment (-11.9%), and coconut oil (-11.7%).

With imports surpassing exports, the trade deficit reached $5.49 billion in January, narrower by 5.2% year-on-year.