The country’s renewed ties with China and newfound trade partner Russia are seen boosting the Philippines’s export and import performance this year, according to the National Economic and Development Authority (Neda).
Socioeconomic Planning Secretary Ernesto M. Pernia told reporters increased trade with China and Russia will allow the country’s exports to post a positive growth this year.
The country’s export performance has been in the doldrums, and posted a contraction of 5.2 percent this year. This caused the country’s trade deficit to further widen in 2016.
“It’s [export growth] that’s going to pick up and, hopefully, go beyond zero to positive,” Pernia said. “Exports, especially in terms of agriculture goods and food, fruits are going to be more welcome in China, and also in Russia.”
Pernia added that Russia is also a good market for handicrafts, as well as herbal or alternative medicine products.
The Neda secretary also said the visit of Chinese and Russian nationals are also expected to boost the country’s tourism, which is considered a “service export”.
While exports recovery will be good for the economy, in general, the impact may be less pronounced on the country’s trade deficit.
Pernia said the trade deficit could increase due to the construction projects that will be implemented this year. These projects will require the import of construction materials and machinery.
The country’s trade deficit increased to $73.724 billion, around 13.7 percent higher than the $64.822 billion posted in the same period of last year.
“We might have a lot of imports, too, especially with a lot of construction going to be in effect this year,” Pernia said.
Former Tariff Commissioner George Manzano told the BusinessMirror that, while Philippine exports will get a boost from increased trade with China and Russia, it may not boost overall trade performance.
Manzano, however, agreed with Pernia, saying trade relations with China and Russia augur well for increasing agriculture exports, particularly fruits and vegetables.
He added that minerals exports could also see an increase, especially if China will decide to invest more on infrastructure this year. The Chinese Communist Party, Manzano said, has yet to decide on the economic direction of the country.
“This will help, but you cannot rely on it to boost the whole trade performance. Nonetheless, it helps in diversifying the country’s export markets,” Manzano said.
Ateneo EagleWatch senior fellow Alvin Ang, meanwhile, said he was not that optimistic about the impact of trade relations with China and Russia on the country’s trade performance.
Ang said that in order for these trade relations to have significant impact on trade performance, particularly in narrowing the trade deficit, may take years.
“It takes time to build demand,” Ang said. “We could even expect more imports, since they are capital-goods sources rather than them buying from us.”
Pernia said the positive global growth outlook paired with the upcoming Asean integration is the perfect opportunity to expand the Philippines’s exports portfolio.
Import payments grew to $7.3 billion due to the swell in demand for capital goods (29.7 percent), consumer goods (32.6 percent), raw materials and intermediate goods (11.1 percent), and mineral fuels and lubricants (1.3 percent).
Conversely, export earnings dropped to $4.7 billion due to the 10.6-percent decrease in the value of manufactured goods, mostly electronics that declined by 7.9 percent.
“While we are expanding our trade relations with potential markets, we need to further harness our existing free-trade agreements and continue to push for reforms. This will improve our business environment and increase our attractiveness to foreign investors,” Pernia said.