Philippines posts highest trade deficit

The Philippines posted its biggest trade deficit in November as imports surged, indicating strong domestic activity, but underscored worries that a current account deficit would weaken the peso. The trade gap widened to $3.78 billion, the highest on record, and followed a trade deficit of $2.82 billion in October, the statistics agency said on Wednesday. That brought the trade deficit in January to November to $25.7 billion, compared with the $24.2 billion gap a year earlier.
Imports jumped to a record $8.74 billion in November, up 18.5 percent from last year, driven by hefty purchases of fuel, telecommunication and transport equipment, electronic products and iron and steel. Exports increased 1.6 percent to $4.96 billion, the lowest since February 2017, as a decline in the shipments of machinery and transport equipment and other manufactured goods offset the gains in electronic products, cathodes and gold.
While the November trade figures bode well for economic growth, the widening trade gap adds to worries the current account deficit would persist in 2018, continuing to pressure the peso, economists said. "Data continues to indicate a strong economy. But the flip side is that a challenging trade and current accounts would pressure peso again this year," said Joey Cuyegkeng, economist at ING in Manila.
The peso weakened to a three-week low of 50.45 against the US dollar early on Wednesday following the trade data. The government has set a record 3.8 trillion pesos ($75.50 billion) budget for this year, up more than 12 percent from last year, as it aims to build more ports, airports and railways to attract investments and boost economic growth.
With the greater demand for infrastructure-related goods, strong import growth will likely be a mainstay in the coming months, which would likely lead to a persistent widening of the trade deficit, said Eugenia Victorino, economist at ANZ in Singapore. The central bank expects the current account deficit to widen to $700 million this year from a projected gap of $100 million in 2017, which would be the country's first current account deficit since 2002.