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Philippines trade deficit narrows in July, bodes well for growth

[MANILA] The Philippines' trade deficit narrowed in July as exports jumped while imports declined for a second straight month, a good omen for economic growth in the third quarter.

The Philippines had a trade gap of US$1.65 billion in July, smaller than the previous month's US$2.15 billion deficit, government data showed, suggesting the Southeast East Asian nation could end the year with a lower-than-expected trade shortfall.

The Philippines has one of the world's fastest-growing economies and strengthening global trade could complement robust domestic consumption.

President Rodrigo Duterte's government aims to sustain annual growth above 7 per cent during his six-year term.

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Exports rose at an annual pace of 10.4 per cent in July compared with previous month's 0.8 per cent gain, bringing year-to-date growth to 13.9 per cent, helped by a double-digit rise in electronic products, the top export item.

Reduced imports of iron and steel, electronic components and industrial machinery and equipment shrank July imports by 3.2 per cent, a second declining month.

"Positive base effects for exports and a favourable economic environment in major export markets coupled with moderate import growth imply that the trade deficit this year may not be as bad as prevailing market sentiment," said Joey Cuyegkeng, economist at ING bank in Manila.

The narrower trade gap could also moderate pressure on the Philippine peso, Mr Cuyegkeng added. The peso weakened to 11-year lows last month on fears of a larger current account deficit this year, following a record trade gap in May. Government offices, schools and financial markets were shut on Tuesday because of flooding.

The peso closed at 50.90 to the dollar on Monday after hitting a near one-month high on September 8.

Gross domestic product rose 6.5 per cent in the second quarter from a year earlier, picking up from the 6.4 per cent pace in the first quarter, and matching the bottom end of the government's 6.5-7.5 per cent growth target for this year.

Manila aims to lift growth to as much as 8 per cent during Mr Duterte's term through a six-year, US$180 billion "Build, Build, Build" infrastructure programme to bring down poverty and create jobs.

The government said on Tuesday that the unemployment rate eased in July for a second straight quarter to reach 5.6 per cent.