Trade gap signals domestic demand growth

  • Written by Peoples Journal
  • Published in Business
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An economist from the Asian Development Bank on Wednesday said the Philippines' trade deficit was not alarming but an indicator of growing domestic demand.

“The country is running a trade deficit and it is not alarming. It is not a sign of over consumption, it is not a sign of over investment, over spending of the country. It is a sign of growing domestic demand,” Aekapol Chongvilaivan, Country Economist for the Philippines at ADB, said in a press briefing.

Chongvilaivan explained there has been a slowdown in Philippine export growth this year given the high base effect after exports accelerated in 2017.
He said Philippine economic growth is mainly driven by domestic consumption, investments, as well as importation of capital goods.
“Machinery takes up a significant portion in the increase in imports and therefore, increase in the trade deficit in the Philippines signifies this domestic-driven growth,” he added.
The Philippine Statistics Authority on Wednesday reported that imports continued to outpace exports in February 2018, expanding the country’s trade deficit to USD 3.06 billion during the month from USD 1.77 billion the previous year.
Imports surged by 18.6 percent from USD6.51 billion to USD 7.72 billion in February, while exports went down by 1.8 percent from USD4.74 billion to USD4.66 billion.
Merchandise exports fell for the first time since November 2016 due to lower receipts from total agro-based products, manufactures and petroleum products.
Among agro-based products, export of coconut products fell by 50.8 percent from a high 66.9 percent growth in 2017.
For per part, Rosemarie Edillon, Officer-in-Charge and Undersecretary for Policy and Planning at the National Economic and Development Authority (NEDA), attributed this to the lingering effects of tropical storms that hit Visayas and Mindanao during the latter part of 2017, as well as the substitution of coconut oil with more competitively priced palm oil in some markets.
Edillon said while the performance of Philippine exports is lukewarm with the easing of global manufacturing production growth, the domestic manufacturing sector appears to remain buoyant.
Based on the results of the Monthly Integrated Survey of Selected Industries for February 2018, Philippine manufacturing grew by 24.8 percent in volume and 23.6 percent in value.
Meanwhile, the PSA said imports of raw materials and intermediate goods represented the largest share of 38 percent to total imports in February 2018.
Semi-processed raw materials accounted for 35.6 percent share of the commodity group.
This was followed by capital goods and consumer goods comprising 33.4 percent and 17.5 percent share of the total imports, respectively.