By Cai Ordinario, February 13 2019; Business Mirror

Image Credit to Business Mirror

TRADE headwinds will pose risks to the country’s export and import performance this year, according to the National Economic and Development Authority (Neda).

In a statement, Socioeconomic Planning Secretary Ernesto M. Pernia said policy uncertainties, amid trade tensions between the United States and China, will significantly affect the country’s exports this year.

In 2018, the Philippines already registered lackluster trade performance with exports posting a contraction of 1.8 percent. Imports was able to eke out a 2.8-percent full-year growth last year.

“Merchandise trade in all the monitored Asian economies continued to weaken in the last month of 2018, as the region began to feel the impact of the weakening Chinese economy and the US-China trade tension,” Pernia said.

“Policy uncertainty remains a threat to global trade, investment and output, especially as US-China trade tensions continue,” he added.

Ateneo Center for Economic Research and Development (Acerd) Director Alvin P. Ang told the BusinessMirror that external trade performance this year will be moderate mainly due to the weakness in China’s economy.

However, exports performance will still be able to recover to single-digit growth this year, while imports may post a 12-percent growth.

Ang said exports performance will be less than government expectations, which is at 6 percent this year. His expectation of imports growth is slightly higher than government estimates of 9 percent.

‘Deeper forces at work’

For Philippine Institute for Development Studies (PIDS) Senior Research Fellow Roehlano M. Briones, further economic global growth slowdown will make or break trade performance this year, especially export earnings growth.

Briones said there are “deeper forces at work” that have affected trade performance in 2018 than fears that market uncertainties the pending Trabaho bill is creating.

“Strong demand continues to drive imports, weak external demand leads to contraction in exports,” Briones said.

To mitigate this impact, the national government should continue to work on legislative reforms that will open up sectors for foreign investment,” Pernia said.

He added that, given the widening current account deficit due to the trade gap, the proposed amendments to the Foreign Investment, Retail Trade and Public Services Acts must be pursued.

“We should encourage foreign firms to transfer their manufacturing facilities in the Philippines and to take advantage of the growing domestic market,” he said.

Weak Chinese economy

Neda Undersecretary for Planning and Policy Rosemarie G. Edillon told the BusinessMirror that the country’s trade performance in 2018 was mainly due to the weak Chinese economy.

The weakness in the Chinese economy, which was due to the trade tensions, is also being felt in many other Southeast Asian economies.

In December, PSA data showed exports contracted 12.3 percent, while imports declined 9.4 percent. Electronics exports and imports also suffered a contraction of 15.2 percent and 1.6 percent, respectively.

“Trade in other countries [e.g., China, India, Indonesia, Singapore, Thailand] contracted as well, while it hardly changed in Malaysia and Vietnam,” Edillon said.

The PSA reported that the country’s total merchandise trade contracted by 10.5 percent, reaching $13.2 billion in December 2018. This is the first negative growth posted since July 2016.

Nevertheless, total merchandise trade for full year 2018 still grew by 7 percent, reaching $176.4 billion, compared with the $164.8 billion recorded in 2017.