MANILA: The Philippines posted its widest monthly trade deficit on record as imports rose at their fastest pace in five months, but exports rose rapidly as well a positive sign for one of the world’s fastest-growing economies.
The Southeast Asian nation had a trade gap of $2.84 billion in October, wider than the previous record of $2.74 billion posted in May this year, Philippine Statistics Authority (PSA) data showed on Tuesday (12/12).
Imports rose 13.1 percent, driven by hefty purchases of iron and steel, chemicals, electronics, fuels and lubricants, telecommunication equipment and electrical machinery, pointing to strong domestic activity.
Exports grew 6.6 percent in October from a year ago, driven by double digit gains in six of the top 10 commodities, notably gold, electronic equipment and parts, metal components, mineral products and bananas.
The trade gap has been a cause for concern in financial markets, but the peso was range-bound in Tuesday morning trade, moving between 50.33 and 50.465 against the US dollar, from Monday’s close of 50.36.
It remains the worst performing currency in Asia this year, weighed down largely by concerns about the deterioration in the country’s current account balance, or external payments position, which includes payments for imports and remittances inflows.
Joey Cuyegkeng, senior economist at ING, said much of the peso’s weakness was from June when the market finally realized that the deterioration in the trade balance would lead to a current account deficit after 15 straight years of surpluses.
“This weakness in the external payments position would persist and deteriorate further in 2018 on strong economic growth and rebound in capital equipment imports,” he said in a note.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla, however, has repeatedly sought to allay concerns about the current account deficit, attributing it to rapid economic growth backed by rising investments. The domestic economy beat expectations to post growth of 6.9 percent in the third quarter, driven by strong industrial and services output, boosting the government’s confidence that this year’s 6.5 to 7.5 percent growth target would be met.
