Philippine merchandise imports declined 25.8% in December 2015 from the year-ago level, the steepest monthly decline recorded since April 2009 and halting consecutive months of positive growth, according to the National Economic and Development Authority (NEDA).
Total payments for imported goods dropped to US$4.056 billion in December 2015 from $5.470 billion in December 2014, according to the Philippine Statistics Authority.
For the whole of 2015, imports increased 2% to $66.686 billion from $65.398 billion in 2014.
Despite the decline in December, NEDA said “strong domestic demand will prop up imports growth in the near term, as we expect continued expansion in inward shipments of power-generating machines, office and electronic data processing machines, and telecommunications equipment.”
Moreover, investments are seen to increase as investor confidence in the country is still growing, the agency noted. “This will in turn boost demand for imports of capital goods as well as raw materials and intermediate goods,” said Margarita Songco, NEDA deputy director general and officer-in-charge. Songco is NEDA OIC while NEDA chief Dr Emmanuel Esguerra attends Asia-Pacific Economic Cooperation meetings in Peru.
In December 2015, the value of imported capital goods, a leading indicator of strong economic activity, remained resilient, increasing 20.9% to $1.5 billion. This accounted for 37.8% of total merchandise imports for the period.
But the downturn in imports of raw materials and intermediate goods (-53.2%) and consumer goods (-20.3%) pulled down total imports. Import payments for raw materials and intermediate goods declined in December 2015 with lower imports of materials and accessories for the manufacture of electrical equipment (-74.1%) sourced mainly from Taiwan, Japan, and Singapore. This partly mirrors the decline in global electronic and semiconductors sales in December 2015 due to softening global demand, NEDA noted.
Nonetheless, NEDA sees household consumption remaining strong on upbeat consumer confidence, low inflation, low interest rates, better employment opportunities, and a still positive outlook for remittances inflow, which bodes well for imports of consumer goods.
Songco said that although domestic demand is expected to drive imports growth in the near term, sluggish global growth remains to be the downside risk. A downturn in the economy of the country’s major trading partners such as Japan and China might drag imports, particularly intermediate goods used for electronics exports.
“The Philippines’ sound macroeconomic fundamentals should continue to attract attention from investors, both domestic and foreign. The government must pave the way to sustain this renewed interest through institutionalizing reforms from the past five years,” Songco added.
Among steps to ensure reforms are sustained are the passage and implementation of the Philippine Competition Act (Republic Act No. 10667), Foreign Ships Co-Loading Act (R.A. 10668), Tax Incentives Management and Transparency Act (R.A. 10708), and Customs Modernization and Tariff Act, Songco said.
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