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Trade remains weak as import/export decline

Trade trends will likely continue going into 2021 with a fragile global recovery expected to limit particular gains for the export sector

Joshua Lao

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The country’s trade performance for the month of December remained weak as both imports and exports posted declines, latest data from the Philippine Statistics Authority (PSA) showed.

With the decline in both sectors, total external trade dropped by minus 5.6 percent to $13.65 billion. Nevertheless, such proved to be slower than the annual minus 9.9 percent decrease recorded month-ago.

The PSA refers to the balance of trade in goods as the difference between the value of imports and exports.

Exports in December registered a minus 0.2 percent decrease with $5.73 billion, while imports contracted by minus 9.1 percent to $7.91 billion.

ING Bank senior economist Nicholas Mapa attributed the slight decline in exports to the faltered outbound shipments to China which affected the whole sector.

Still, Mapa said the decline in exports and imports, the latter of which remained in the red for the 20th month will likely continue toward 2021.

The net effect of these trends will mean that the 2021 trade deficit remains below the pre-Covid-19 of $3.1 billion.

“Trade trends will likely continue going into 2021 with a fragile global recovery expected to limit particular gains for the export sector while downbeat economic prospects will likely translate to subdued import demand as both firms and households limit investment activity,” Mapa explained.

“The net effect of these trends will mean that the 2021 trade deficit remains below the pre-Covid-19 of $3.1 billion, which in turn would be supportive of peso as corporate demand for the dollar remains soft,” he added.

According to him, the slight widening of the trade deficit will be a negative for fourth quarter 2020 gross domestic product figures, which already contracted for three consecutive months.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said that further pick up in imports and exports could be supported by the near record-low interest rates along with the legislation of the proposed economic bills.

“Increased infrastructure spending, which also forms part of the economic recovery program, would also help the importation of raw materials, especially construction materials,” Ricafort said.

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