The country’s trade deficit swelled to a record-high $2.75 billion in May due to a significant increase in payments for imported capital equipment used by factories, according to the National Economic and Development Authority.
Data released by the Philippine Statistics Authority (PSA) on Tuesday showed the country started posting a trade deficit of $2 billion and above in January 2016. Prior to May 2017, the highest trade deficit recorded by the Philippines was at $2.58 billion in April 2016.
Socioeconomic Planning Secretary Ernesto M. Pernia told reporters in an interview that the increasing trend in the trade deficit could be sustained and can be good for the economy in the long run.
“I think the trade deficit is caused by the importation of capital equipment, intermediate goods for production. It’s actually a positive thing when import growth is caused by capital goods. In fact, that has been the trend. A bigger part of imports now is accounted for by capital imports,” Pernia said.
PSA data showed that in May, raw materials and intermediate goods accounted for 38.9 percent of the total import bill, while the share of capital goods was at 33.6 percent.
For January to May, total trade grew by 13.9 percent to $63.3 billion, with exports and imports growing by 16.3 percent and 12.3 percent, respectively.
Pernia noted the 15.4-percent hike in total trade in May was supported by the sixth consecutive double-digit growth of exports since December 2016, and by the recovery of imports from its 0.1- percent decline in April.
“Our country’s trade growth is consistent with the global pickup. We are striding forward with world trade performers and we intend to match this growth with sound macroeconomic policies,” he said.
In terms of markets, Pernia said countries in East Asia remained as the country’s strongest trade partners, with a 48.3-percent share in export revenue and a 46.2-percent share in imports.
Trade with Asean was also robust as the region accounted for 15.7 percent in export receipts and 26.1 percent in inward shipments.
PSA data also showed that exports to the European Union continued its third consecutive month of double-digit growth at 38.5 percent. Exports to the Asean also posted a growth of 25.6 percent in May.
The Neda said the government targets to increase the country’s export receipts by about $100 million annually in the next five years.
The government is confident that this could be achieved as travel goods, such as bags and wallets, can enter the US market at zero tariff starting July 1 after Washington expanded the Generalized System of Preferences.
“As we aim to diversify our markets, we are also pleased to note that our exports to Malta, the United Arab Emirates [UAE] and India grew significantly,” Pernia said.
He said exports to Malta, India and UAE grew by 130.6 percent, 71.9 percent, 211.9 percent, respectively, and that this is the fourth month this year that exports to the UAE have almost tripled.
Trade with other Asian countries also posted double-digit growth rates led by Vietnam (25.8 percent), Indonesia (24.1 percent), Malaysia (23.4 percent) and India (22 percent).