Philippines Witnesses Shrinkage in Trade Deficit to $4.013 Billion in December 2023

The trade deficit of the Philippines experienced a notable contraction in December 2023, as indicated by the latest data from the Philippine Statistics Authority (PSA). The reduction in the trade gap underscores a more rapid decline in imports compared to exports for the said period.

The preliminary figures put the balance of trade in goods at a deficit of $4.01 billion for December 2023, marking an 11% improvement from the $4.5 billion deficit recorded in December 2022. The deficit was also less than the $4.729 billion figure seen in November 2023. A trade deficit occurs when a country’s import expenditure surpasses its export revenues.

According to Michael Ricafort, the chief economist at Rizal Commercial Banking Corp., the deceleration in the global economy, influenced by higher interest rates in the US and globally, has led to a reduction in global demand, trade, and investments. This slowdown, while aimed at managing inflation, has had the unintended consequence of reducing both imports and exports for the Philippines on a year-on-year basis.

December 2023 saw the Philippines’ exports slightly decline by 0.5% to $5.78 billion from $5.81 billion in the same month the previous year. Imports contracted more significantly, by 5.1%, dropping to $9.79 billion from $10.32 billion in December 2022. The commodity group recording the highest annual drop in export value was other mineral products, followed by machinery and transport equipment, and electronic equipment and parts.

Hong Kong emerged as the primary destination for Philippine exports in December 2023, accounting for 16.5% of the total export value. The top five export partners also included the United States, Japan, China, and the Republic of Korea.

On the import side, the most significant annual decrease in value was noted in mineral fuels, lubricants, and related materials. Electronic products and industrial machinery and equipment also saw notable declines. China remained the largest source of Philippine imports, constituting 23.2% of the total imports for December 2023. Japan, Indonesia, the USA, and Thailand rounded out the top five import sources.

The total external trade in goods for the Philippines amounted to $15.57 billion in December 2023, reflecting a 3.5% decrease from the $16.13 billion recorded in December 2022. Ricafort pointed out that the slowdown in external trade mirrors the broader softening of global economic indicators, particularly in manufacturing and services, largely due to increased financing costs from heightened interest rates since 2022.