BENEFIT. An economist projects continued improvement of the country’s trade figures given the sustained slowdown of inflation rate both here and abroad. Rizal Commercial Banking Corporation chief economist Michael Ricafort said the deceleration of inflation rate is expected to eventually lead of lower central bank key rates, which will make external trade more attractive. (File photo)
MANILA – Sustained deceleration of inflation rate, which is seen as a factor for the cuts in central banks’ policy rates, is projected to support the continued improvement of the country’s exports and imports.
The Philippine Statistics Authority (PSA) reported the 1.9 percent annual expansion of the country’s exports last May.
And while imports contracted by 8.8 percent on an annual basis, its value rose to USD10.84 billion last May from USD9.75 billion the previous month, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said in a report on Wednesday.
Ricafort said the latest exports figure for the country is among its six-month highs due to the increase in electronics/semiconductor exports -- the country’s largest exports.
He traced this improvement partly to slowdown in the rate of price increases, the drop in global oil and other commodity prices that lessened exporters’ input costs, and easing of concerns about US’ regional bank failures and its impact on the risk of US recession.
For one, the domestic inflation rate sustained its deceleration after hitting a 14-year high of 8.7 percent last January.
Last June, it further slowed to 5.4 percent from previous month’s 6.1 percent, bringing the six-month average to 7.2 percent.
Ricafort said imports also gained on a monthly basis, among its highest since the start of this year, due to lower prices of oil and other commodities in the international market and the strengthening of the peso against the US dollar.
“Still relatively weaker peso exchange rate vs. the US dollar since 2022 by about 9 percent also made imports more expensive, thereby partly weighing on demand for some imports and help narrow the trade deficit/net imports in recent months; but a relatively weaker peso exchange rate would help exports become more price competitive globally,” he said.
The country’s trade deficit to date stood at USD4.4 billion, down 20.9 percent from last April and by 9 percent from May 2022.
Another negative factor expected to have limited the rise of trade deficit is the higher interest rate both here and abroad, Ricafort said.
Despite of this, Ricafort said sustained “easing trend in inflation (that earlier increased input prices/production costs) and, eventually, could help eventually support the easing of interest rates/borrowing costs especially into 2024 would support the recovery in both exports and imports for the coming months.”
He said inclusion of the Philippines in the world’s largest free trade agreement -- the China-led Regional Comprehensive Economic Partnership (RCEP) -- is expected to help attract foreign direct investments (FDIs) to the Philippines, and boost the country as production or marketing base as well as access point to bigger export markets.
“The RCEP would also expand the sources of cheaper imports for foreign investors that manage their respective global supply chains for the country per se with reduced import tariffs for the coming years,” he added. “This would also mean increased competition for some local producers/suppliers in view of the influx of cheaper imports from other RCEP member countries for the coming years.” (PNA)
