Narrowing trade deficit augurs well for RP's growth
Narrowing trade deficit augurs well for RP's growth
By Mynardo Macaraig
MANILA (AFP): The Philippines said Tuesday its trade deficit hit a 26-year low last year and analysts said the news augured well for medium-term growth despite the regional economic crisis.
The deficit fell from US$10.71 billion in 1997 to a mere $164 million, the National Statistics Office said in a statement.
It said the decline was due to a 17.5 percent fall in merchandise imports to $29.66 billion and a 16.9 percent rise in exports to $29.496 billion.
Total trade for the year fell 3.3 percent over 1997 to $59.156 billion, it added.
Analysts said that while the economy was still struggling to recover from the Asian crisis, the 1998 export growth was a good sign.
Alberto Fenix, head of the Philippine Chamber of Commerce and Industry, said the downturn in total trade was "worrying" but he was not too disturbed by the decline in imports.
He said preliminary figures showed that while the import of both capital equipment and non-essentials had declined, the downturn was not that sharp and was expected because of the Asian crisis.
"Most of the decline is in the non-essentials," Fenix told AFP, adding that "the (importation of) raw materials required for production has still grown."
He said the target of 12-13 percent export growth this year was easily attainable.
While many had predicted an export boom after several Asian nations including the Philippines devalued their currencies starting in 1997, the Philippines has enjoyed the strongest export growth and evaded the worst effects of the crisis.
Robert Sears, executive director of the American Chamber of Commerce, said this was one more indication that "the Philippines is better off" than its neighbors.
But he warned that the decline in imports of capital equipment might be a sign that foreign investment was declining and that vital infrastructure projects were being delayed.
Ramon Sarmiento of Dharmala Securities Philippines Inc. said the latest figures were a positive development despite the decline in imports. He played down the fall in total trade, saying demand in other Asian countries had fallen due to the turmoil.
However since the United States was the country's main export market, the continued strong economy there would likely boost Philippine exports further.
"If the United States remains that way and our export industry remains healthy, we will probably improve in the rest of the year," Sarmiento said. "This will probably buoy the Philippine economy in 2000."
Odie Pantillano, an economist with Securities 2000 Inc., said the crisis may have changed conditions to favor Philippine exporters.
Imports of raw materials for exports -- particularly components for electronics, the country's main export -- were still growing even if other import items were declining, he said.
"It is really more of the devaluation having an effect on the incentive structure of the economy," he said. Export industries were becoming more competitive while banks were now more willing to lend to this sector.
Philip Gielczyk, country director of the U.S.-ASEAN Business Council, also played down the slowdown in total trade and imports.
"Whenever you have a trade balance in your own favor, as long as you are not restricting imports that is a positive message," he told AFP.
However he warned that Philippine exports were too dependent on a few sectors and on one market.
Electronics and components accounted for 59 percent of total Philippines exports in 1998 and the U.S. market absorbed 34.2 percent of exports.
Although the U.S. economy seemed poised to continue growing, a cyclical downturn in electronics could hurt the Philippines, he warned.