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November trade deficit narrowest since June

By Arjay L. Balinbin, Senior Reporter

The Philippine trade deficit dropped to its lowest level in five months in November, suggesting that trade could contribute to economic growth in the fourth quarter, though declining imports hinted at slowing domestic demand.

The trade deficit was $1.73 billion, lower than $1.79 billion in October and $3.65 billion in November last year.

The lower trade gap translated to $1.9 billion less demand for dollars to pay for imports, supporting the peso’s appreciation against the greenback in recent months, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in an e-mail.

Coronavirus-related lockdowns cut the country’s net imports amid reduced business and economic activities, he pointed out.

“A further pickup and reopening of the local and global economies from lockdowns, a reduction in new COVID-19 cases, and further progress on the development and deployment of coronavirus vaccines could help improve economic recovery prospects,” Mr. Ricafort said.

Relaxed quarantines in Manila, the capital and nearby cities in the coming months could boost the economy further, he added.

Merchandise exports rose by 3% from a year earlier in November from a revised 1.2% decline in October and a 0.2% slide in November last year, according to preliminary data from the local statistics agency.

Export growth in November was the fastest in 10 months.

Merchandise imports shrank for the 19th straight month in November by 18.9% to $7.52 billion. This almost matched the 18.8% contraction in October and worse than the 4.5% decline in November last year.

The country’s external trade in goods fell by more than a tenth to $13.31 billion in November from a year earlier, bringing the 11-month level to $135.60 billion, which is a fifth lower than a year earlier.

For the 11 months to November, exports fell by 11.1% to $57.97 billion, better than the Development Budget Coordination Committee’s (DBCC) 16% estimate for 2020.

Year to date, imports reached $77.63 billion, a quarter lower than a year earlier and worse than the DBCC’s revised target of a 20% decline for the full year.

For the 11 months, the trade balance hit a deficit of $19.66 billion, lower than the $37.7-billion gap a year earlier.

Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila Branch, traced export growth to strong outbound shipments to China and Taiwan as both countries bounced back from the COVID-19 fallout.

The trend of modest export gains and weak imports are likely to continue “for at least the first half of the year with the recent spike in COVID-19 cases likely to sap momentum from the recent pickup in global trade, leading to softer export growth,” he said in an e-mail.

“Domestic activity in the coming quarters will likely remain subdued, with the economy expected to remain in recession until 2Q 2021, which would translate to only a modest pickup in import demand,” Mr. Mapa said.

With imports expected to remain well below pre-pandemic levels and exports not seen to sustain their recent pickup in volume, the trade deficit should remain manageable, he said.

“The peso should enjoy modest appreciation pressure if the global weak US dollar theme plays out,” he added.

Electronic products remained the Philippines’ top export in November, with earnings of $3.53 billion, 4.6% higher than a year earlier. They accounted for 60.9% of total exports, the Philippine Statistics Authority said.

The US was the top export destination, receiving $956.8 million in exports or 16.5% of the total. It was followed by China ($923.65 million), Japan ($872.95 million), Hong Kong ($736.13 million) and Singapore ($313.89 million).

China was the Philippines’ biggest supplier of imported goods for the month, with a total value of $2.02 billion, or 26.8% of the total. It was followed by Japan ($734.35 million), the US ($554.40 million), Indonesia ($545.58 million) and South Korea ($528.88 million).

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