Record exports propel trade to 17-month high in March

MANILA, Philippines — Trade soared to its highest level in 17 months in March, buoyed by a record export performance and nascent import growth that nonetheless failed to convince economists external activity had finally turned a corner. 

External trade grew 22.5% year-on-year to $15.78 billion in March, the largest since the $16.26 billion worth of shipments recorded in October 2019, the Philippine Statistics Authority reported on Friday. The trade deficit stood at $2.41 billion, down 11.5%.

Shipments are adding to a diversified economic picture that unfolded in the run up to the release of the first-quarter gross domestic product. Together with trade, a pandemic-low jobs report this week spurred optimism the economy was finally getting back its groove, only for those hopes to get dashed by a separate report on Friday that showed manufacturing had continued to languish.

On trade, merchandise exports were the primary driver of activity, climbing 31.6% year-on-year to a monthly record of $6.68 billion in March. Imports also contributed to the positive outturn, notching its second straight growth of 16.6% to $9.1 billion following 21 straight months of slump.

Economists were however left unimpressed by the trade’s bounce at the last month of the first quarter, saying the lift it provides failed to counter the depressing impact of weak consumption. The growth print itself is not surprising Nicholas Antonio Mapa, senior economist at ING Bank in Manila, who have long expected that last year’s low base would distort a huge chunk of economic data this year.

That is very true for trade which on March 2020, where the current data is compared, suffered a bigger 25.6% drop. That means that at its current expansion pace, it was not even regaining lost ground from last year. The same can be said for exports and imports. 

“Exports are also benefiting from the favorable base,” Mapa said in a commentary. “But we could see an extra boost coming from outbound shipments for electronics, which posted a hefty 25% increase driven partly by the global shortage of chipsets.”

Imports sustain growth

Data showed mineral products, chemicals and other manufactured goods that were not specified all more than doubled their value from last year. Shipments abroad of metal components grew 84.4% year-on-year, while electronic equipment rose 63.1%. Machinery and transport increased 45.7% in an annual basis.

“The March trade balance performance will bode well for 1Q GDP growth results, however, they may not be enough to buoy 1Q GDP growth to positive territory,” Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said in an online exchange. He projects GDP shrank 3.6% on-year in the first quarter, wider than last year’s 0.2% contraction.

While exports directly add to GDP, imports do the opposite but are nonetheless closely watched for a sign of local economic activity. Before mid-2019, the Philippines was importing large capital and consumer goods to meet the demand of government infrastructure building and its growing population. That all began to change even prior to the pandemic, with the health crisis only magnifying the weakness further.

In March, imports climbed further from an 8.9% growth in February supported by a 30.9% increment from food and live animal shipments as the Philippines looked into increasing dwindling pork supplies to battle inflation. Telcos, capitalizing on work-from-home arrangements that boosted broadband needs, also brought in 28% more in capital materials.

For the entire first quarter, exports have already grown 7.6% year-on-year, while imports inched up 3.2%.