MANILA: Contraction in exports may persist in the coming months as low commodity prices and weak demand show no sign of abating for now, the chief economist of the Department of Finance said.
“The decline in total exports may be traced to dampened appetite in trading partners and the decline in prices of the country’s major export commodities…,” Finance Undersecretary Gil Beltran said in an economic bulletin.
“Philippine exporters need to diversify their market base and product lines further because the contraction in major markets may continue for sometime,” he said. According to data from the Philippine Statistics Authority, merchandise exports have been on a decline for seven of the past 10 months.
From January to October, the value of outbound shipments dropped 6.2 percent to $48.871 billion from $52.124 billion a year ago. The government has already conceded to missing its seven-percent export growth target this year.
The primary culprit is the declining commodity prices that have lowered the value of export products, Beltran said. Based on the data provided by his office, the import price index in industrialized countries dipped two percent for the first 10 months, up from 1.2 percent a year ago.
The index is used as a gauge of prices charged by developed nations on their imports. China’s index, in particular, decreased by a faster 4.1 percent this year from a growth of 2.2 percent last year.
Falling prices would mean exporters “have to export more in terms of volume in order to increase revenues,” Beltran said. Another export challenge is the economic weakness in the country’s major trading partners such as Japan, which in October accounted for 22.6 percent of exports.
Beltran said while Japan’s weakening manufacturing sector remains robust, a declining yen could make imports more expensive for the world’s third largest economy. “As the Japanese yen enters another phase of weakness vis-à-vis the dollar, Japanese importers may be inclined to import less,” he said.
To offset this, Beltran said exporters must find other “fast-growing emerging markets” where they can ship their products. “Another is to innovate on existing product lines, looking into possibilities of adding more value into them,” he added.
