WIDENING OF THE PHILIPPINES TRADE DEFICIT – A USUAL TREND FOR MANY YEARS

 

International trading is one of the most integral activities that is supposed to be done by every country in today's era. The contribution of developed economies such as the United States, Italy, and Japan is of course more as they have the required infrastructure and resources to bring or send goods. On the other hand, the contribution of developing nations is not at par with that of developed nations but is satisfactory like that of the Philippines, Vietnam, and Turkey.

While doing international trade, it is crucial for analysts and statisticians to determine the three benchmarks for the year – Trade Deficit, Break-even point, and trade surplus. It is advised that every country should maintain a trade surplus every year to keep its economy healthy and growing. A healthy economy, in turn, attracts investments of big investors and the establishment of big companies in the nation. Today, we are going to study the trading trends of the Philippines in the past few years and check when the economy of the country was healthy and when it was not.

CURRENT GLOBAL TRADE SCENARIO OF THE PHILIPPINES – 2023

It is very shocking when we study the Philippines Trade Data for the ongoing year 2023 that in the initial 2 months, the country has faced a widening of trade deficit. It has been noticed that the Philippines Export Data is experiencing a decline for at least 5 years now which has led to a steep growth in trade deficits. As per the reports and Philippines Trade Data for the month of January 2023, the trade deficit took a major rise of almost 27.5% and reached USD 5.75 billion in January.

The exports from the nation fell by around 13.5% to USD 5.19 billion, whereas as per the Philippines Import Data for the same time, the imports to the nation went up by 4% and touched USD 11 billion which took the trade deficit to USD 4.3 billion in January 2023.

This trade deficit has been rising consistently for almost 5 years now and adversely affecting the economy of the nation. Nicholas Antonio Mapa, a senior economist at ING bank, Manila said that this trade deficit will lead to a fall in the value of the Philippines, peso as against other currencies. According to him, the trade deficit in January was beyond expectations and it acted as one of the prime causes of PHP lagging in the January Asia FX rally.  

PAST TRENDS OF THE PHILIPPINES TRADE (2017-2021)

PHILIPPINES TRADE DATA – 2017 TO 2021
YEAR	IMPORTS	EXPORTS	ANALYSIS
2017	USD 98.48 billion	USD 63.23 billion	USD 35.25 TD
2018	USD 115.11 billion	USD 67.48 billion	USD 47.63 TD
2019	USD 112.90 billion	USD 70.33 billion	USD 42.57 TD
2020	USD 90.75 billion	USD 63.87 billion	USD 26.88 TD
2021	USD 124.38 billion	USD 64.61 billion	USD 59.77 TD

 

As per the above-mentioned table and analysis, the Philippines is experiencing a trade deficit for at least 5 years now. It has been estimated that due to these persistent trade deficits, the Philippine currency would lose its value over other regional currencies and will cause inflation in the country. Till now the peso has fallen by almost 2% and reached an all-time low of 53.65 pesos per USD in the month of February 2023.

CONCLUSION

It is advised that if the Philippines is not able to reduce the values in its Philippines Export Data then the nation should try to reduce values in Philippines Import Data by reducing imports and manufacturing most of the products domestically so as to bring things at least to the break-even point.

Nicholas Antonio Mapa says that the decline in exports is due to the tight relations of the Philippines with China as it is the major export partner of the Philippines. As per Mapa, the relations with China would soon be normalized as the exports would resume at full pace in upcoming months.

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