By Beatriz Marie D. Cruz, Senior Reporter
THE PHILIPPINES’ trade-in-goods deficit narrowed by 3.5% year on year to $3.85 billion in August — the smallest gap in 15 months — as strong global chip demand boosted electronics exports, according to data from the Philippine Statistics Authority (PSA).
The August deficit was smaller than the $3.99-billion shortfall a year earlier and shrank by 39.3% from $6.35 billion in July.
The country’s trade balance has remained in deficit since it posted a $64.95-million surplus in May 2015.
“The August improvement in the trade balance is encouraging but remains largely driven by a highly concentrated electronics boom rather than a broad-based improvement in external competitiveness,” Chinabank Research said in a commentary.
Merchandise exports jumped 27.8% year on year to $9.11 billion in August, accelerating from 5.5% growth a year earlier and 10.9% in July. The August export was the highest since the PSA series began in 1991.
Imports climbed 16.6% to $12.96 billion, reversing a 0.3% decline a year earlier but slowing from the 23% surge in July. The import bill was the lowest since $11.4 billion in February.
The trade deficit widened by 26.3% to $41.56 billion in January to August from a year earlier.
Exports rose 14.8% year on year to $64.04 billion, while imports jumped 19.1% to $105.6 billion.
The Development Budget Coordination Committee expects goods exports to rise 3% and imports by 5% this year.
ELECTRONICS BOOM
Electronic products, which accounted for 68.1% of total exports, surged 59.9% to $6.2 billion in August. Semiconductor exports jumped 73.5% to $5.24 billion and accounted for 57.6% of electronic product exports.
Francisco Cid L. Terosa, an associate professor and former dean of the School of Economics at the University of Asia and the Pacific, said the artificial intelligence (AI) boom continues to fuel global demand for Philippine electronics.
“The surge in exports can be attributed to the rapidly growing global demand for electronic products, particularly semiconductors, which can be traced to aggressive investments in AI and related technologies in major economies such as the US,” he said in an e-mailed reply to questions.
He said similar trade trends could persist in the coming months as global demand for technology-related inputs remains strong and imports stay resilient.
However, he said the country’s export performance remains heavily dependent on the volatile semiconductor industry, while the year-to-date trade deficit remains high.
“Global supply-chain shocks, if any, in the coming months will certainly compromise our trade in goods position,” he said.
Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the growth in semiconductor exports points to the Philippines’ increasing role in the global electronics value chain, although it has yet to keep pace with major exporters such as South Korea.
Mineral exports, which accounted for 4.3% of outbound goods in August, rose 1.8% to $393.54 million.
The US remained the biggest destination for Philippine exports at $2.17 billion or 23.8% of the total. It was followed by Hong Kong at $1.57 billion, China at $1.05 billion, Japan at $704.49 million and Taiwan at $516.01 million.
Chinabank Research said the export-driven improvement in the trade gap could be difficult to sustain amid elevated oil prices and strong electronics imports.
Electronic products were the country’s biggest import in August, surging 61.4% to $4.51 billion from a year earlier. They accounted for 34.8% of the total import bill.
Semiconductor imports jumped 82.4% to $3.61 billion and accounted for 27.9% of imported electronic products.
“This highlights the Philippines’ continued reliance on imported components and its relatively limited capture of domestic value from the current AI-driven electronics boom,” Chinabank Research said.
The research group said the Philippines needs to move its semiconductor industry beyond assembly, testing and packaging to capture more value from rising global electronics demand.
Imports of mineral fuels, lubricants and related materials climbed 38.6% to $1.85 billion, accounting for 14.3% of imports. Raw materials and intermediate goods imports rose 29.2% to $5.14 billion, or 39.7% of the import bill.
Chinabank Research said the increase could partly reflect efforts to build domestic supplies ahead of the expected effects of the El Niño dry spell.
“Food and agricultural imports are likely to remain elevated in the near term as the government continues to build buffer stocks to cushion potential El Niño-related supply disruptions,” it said.
Capital goods imports rose 7% to $3.6 billion, accounting for 27.8% of total imports.
China was the Philippines’ biggest source of imports at $2.94 billion or 22.7% of the total. South Korea followed at $2.73 billion, Japan at $939.85 million, Indonesia at $893.22 million and the US at $717.56 million.