External Trade
Narrowing the Gap
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| The demand for electronic products boosted total trade by 10.6% in January to April |
he strong demand for electronic products fueled a 10.6% rise in total trade (exports plus imports) amounting to US$30.3 billion in the first four months of 2006. With exports registering at US$14.7 billion and imports at US$15.6 billion, the trade deficit for January to April amounted to US$800 million, a good 55.5% lower than the US$1.8 billion deficit in the same period last year.
Exports rose 15.2% in the four-month period from US$12.8 billion the previous year. Electronic products, which make up 65.0% of total exports, grew 14.4% to US$9.6 billion. Moreover, petroleum products shot up 134.0% to US$290 million, becoming the country’s third top export. Banana and coconut oil exports also contributed to the 6.8% growth in the export of agro-based products, which amounted to US$687.7 million. Among export markets, the United States ranked first, buying US$2.6 billion worth of goods from the Philippines. Japan remained at second place, with US$2.4 billion in purchases. The Netherlands’ US$2.0 billion worth of electronics purchases made it the country’s third top export market. Singapore, for its part, bought US$1.2 billion worth of electronic products.
Global Exchange
Philippine external trade, in billion U.S. dollars |
| |
2005
Jan–Apr |
2006
Jan–Apr |
% Change |
| Total Trade |
27.4 |
30.3 |
10.6 |
| Exports |
12.8 |
14.7 |
15.2 |
| Imports |
14.6 |
15.6 |
6.4 |
| Balance of Trade |
-1.8 |
-0.8 |
-55.5 |
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The country’s import bill, meanwhile, grew 6.4% in January to April from US$14.6 billion a year ago. Electronics still led the growth at 3.3%, with imports amounting to US$7.3 billion. However, because of rising world oil prices, the import bill for mineral fuels, lubricants, and related materials recorded a higher 26% rise to US$2.4 billion. Cumulatively, the share of mineral fuels, lubricants, and related materials of the total import bill now stands at 15.2% from only 12.8% in the previous year. In terms of sources of imports, the United States again came in first, delivering US$2.6 billion in products to the Philippines. On the other hand, although imports from Japan slid 22.9% to US$2.2 billion, it still emerged as the second biggest source of imports.
| Signals |
 The inflation rate dipped to a five-month low of 6.7% in June 2006. Core inflation also fell to 5.8%. Inflation for food items dipped to 5.6% from 5.8% in May, while inflation for nonfood items remained at 7.8%.
 The national government’s outstanding debt rose 33.5% to almost P4.0 trillion in end-April 2006 from P3.96 trillion in end-March.
For the sixth straight month, gross international reserves posted record highs, reaching US$21.1 billion as of end-June. The reserves consisted of US$17.7 billion in foreign investments, US$2.9 billion in gold, US$448.2 million in foreign exchange, US$129.4 million in reserve position with the International Monetary Fund, and US$0.9 million in special drawing rights. The GIR level is equivalent to 4.3 months’ worth of imports of goods and payments of services and income. The ratio of bad loans among the country’s commercial banks subsided to 7.4% in end-May from 8.1% in end-April. The Bangko Sentral ng Pilipinas expects the NPL ratio to eventually reach 6.5% with the new law extending the Special Purpose Vehicle Act.
Net foreign direct investments rose 2.7% to US$500 million in the first four months of 2006 from US$487 million a year ago. Net placements of equity capital decreased 40.0% to US$280 million from US$467 million, but reinvested earnings expanded to US$36 million from US$9 million. Net inflows of equity capital also rose to US$184 million from US$11 million.
Net foreign portfolio investments dropped 60.1% to US$773.6 million in the first half of 2006 from US$1.9 billion a year ago. Inflows of portfolio investments shrank 9.1% to US$3.4 billion from US$3.7 billion, while outflows of portfolio investments rose 46.8% to US$2.6 billion from US$1.8 billion.
Remittances of overseas Filipino workers grew 14.8% to US$4.9 billion in January to May from US$4.2 billion a year ago. During the period, the number of workers deployed abroad rose 12.5% to 466,262.
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