[MANILA] Philippine exports fell by the most in four months, reflecting weak global demand that has floored regional economies, but Manila's pledge to raise spending and strong domestic consumption promise to keep the Southeast Asian economy on an even keel.
Exports in August fell 6.3 per cent from a year earlier due to double-digit declines in the shipments of other mineral products, apparel as well as chemicals.
But the drop was not as steep as the 17.4 per cent slide in May as exports of electronic products, machinery and transport equipment, and woodcrafts and furniture registered annual increases.
Shipments to Japan, the country's top destination, fell 1.6 per cent compared with the previous month's 14.6 per cent drop.
However, exports to United States, the second biggest market declined 4.0 per cent in August after a 0.4 per cent rise in July. Shipments to third biggest market China decreased 23.5 per cent, after a 24.1 per cent rise in July.
"It shows that global demand continues to be weak, we are seeing that across Asia. But it does not mean that Philippine growth is going to collapse as we saw domestic demand holding up the economy," said Jose Mario Cuyegkeng, economist at ING bank in Manila.
Mr Cuyegkeng said the Philippine economy could the end the year with growth of 5.9 per cent. While its is slower than the government's new forecast of 6.0-6.5 per cent, the pace is enough to keep the country as one of Asia's fastest growing economies.
Others in the region, including Singapore, South Korea and Taiwan, have been hit hard by a collapse in exports, as a slowdown in China continues to drag on global growth.
Philippine imports rose for a second straight month in July as shipments of capital and consumer goods rose, suggesting a pick-up in business activity and domestic demand.
The government has promised to accelerate spending after a slow start in the year to help offset the impact of faltering exports and a worsening El Nino, which is threatening to crimp farm production and raise inflation.
That, coupled with strong domestic demand, underpinned by US$2 billion monthly remittances from its overseas workers, have given policymakers reason to stand pat on interest rates.
"Indeed, we expect net exports to continue to drag down growth, but fortunately exports in the Philippines constitute one of the lowest shares of GDP across Asia, and the weakness is sufficiently offset by robust private consumption, government spending and investment," said Joseph Incalcaterra, economist at HSBC in Hong Kong.