Strong demand seen in import surge

PHILIPPINE purchases of products from abroad grew at their fastest pace in six years last May, as the country ramped up spending on capital and consumer goods.

Preliminary data from the Philippine Statistics Authority (PSA) showed merchandise imports growing by 39.3% to $6.736 billion in May from $4.834 billion in the same month last year.

Last May saw the third straight month of increase in imports after contracting 5.6% in February. The latest growth figure was above the government's full-year forecast of 7% for 2016 and was the fastest since the 49.4% recorded in April 2010.

"The bullish performance of imports is a clear signal that our domestic economic conditions remain robust despite the weak global economy," Socioeconomic Planning Secretary Ernesto M. Pernia said in a statement.

"With its current upward trend, we expect investments and consumption to drive growth for the rest of the year," said Mr. Pernia, who is director-general of the National Economic and Development Authority (NEDA).

The Philippines was the only one among 11 key Asian economies that posted double-digit growth in imports for that month.

"With the sluggish import activities in the region, we must focus on fast-tracking the country's infrastructure development to support the growth of our economy and improve our absorptive capacity for investments," Mr. Pernia said.

The May imports growth was led by capital goods, which comprised a third of total imports and increased 99.9% to $2.166 billion from last year's $1.083 billion. Its largest sub-sector, telecommunication equipment and electrical machinery, more than doubled to $944.599 million from last year's $439.550 million.

Nicholas Antonio T. Mapa, associate economist at Bank of the Philippine Islands (BPI), attributed the growth to an ongoing trend of corporations that "had invested in expanding their operations on an optimistic outlook for the economy."

The government expects the Philippines' gross domestic product (GDP) to grow by 6-7% this year, with second-quarter data -- which some expect to show growth faster than the first quarter's 6.9% on the back particularly of a one-time boost from election-related spending -- scheduled to be released on Aug. 18. A measure of economic performance, GDP is the amount of final goods and services produced in the country.

Consumer goods, which at 17.9% comprised the second-biggest import category, increased 47.2% to $1.2 billion from $817.98 million a year ago. Fueling the increase were durable goods, which increased 92.4% on brisk take-up of passenger cars and motorized cycles.

"This is consistent with the findings of AmBisyon Natin 2040, which listed car ownership as among the aspirations of the Filipino people," Mr. Pernia said.

"But infrastructure, especially roads, must keep up. At the same time, public transport systems must be improved to expand people's transport options, while we foster economic development in the countryside. Since these strategies take time to implement, we need everyone's full cooperation towards efficient traffic management and strict enforcement of regulations."

To make up for underspending by the previous administration, the new government plans to jack up infrastructure spending to at least 5.2% of GDP and in the process draw in more investments and create more jobs.

Analysts also noted strong growth in raw materials and intermediate goods imports, which at 39.8% comprise the country's major import category, as a sign of a possible rebound in exports down the road. "Another good sign was the growth in raw materials, up 30.4%, which hints at a possible bounce in our export growth going forward as some of these raw materials may be processed for eventual outbound shipment," said BPI's Mr. Mapa.

Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines, agreed, citing the 44.5% growth in electronic products, which at 24.8% make up the country's biggest commodity import. The Philippines largely assembles these electronic components for re-export to China and other countries that make electronic consumer products. "The rise in electronic imports in May suggests that electronic exports might rebound in the future after declining in May. Many of the country's electronic imports are used to produce exported electronic products," Mr. Dumalagan said.

To date, export growth has lagged behind imports, resulting in a balance of trade in goods deficit of $2.021 billion last May, a reversal of the $64.95-million surplus logged in the same month last year.

Mr. Dumalagan sees the country's balance of trade in goods "remain[ing] in deficit amid expectations of growing imports and falling exports."

"Imports may continue to expand from previous year's level given the country's upbeat consumer and business activity. Exports, however, might remain relatively weak due to slowing global growth, aggravated by the uncertainties brought about by Britain's exit from the European Union," he said, while adding that "[e]xpectations of more stimulus from foreign economies might temper the decline in exports towards the end of the year."

The People's Republic of China remained the Philippines' top supplier with a 20.4% share last May and an increase of 65.7% year-on-year. Japan ranked second with a 10.5% share.

In terms of total trade, China remained the Philippines' top partner -- with the latter having a balance of trade deficit of $879.87 million in May -- closely followed by Japan and the United States.

Source: Business World Online