The Philippines’ latest import data for July 2009 shows that the country’s economy remains sluggish–and will likely stay this way until next year.
Imports are a vital indicator of economic performance. More imports mean that manufacturers are likely to increase production–therefore, exports and other industries are bullish. Bullish businesses mean that businessmen and investors will likely put up new ventures or expand, which in turn means more employment. More employment, on the other hand, means more people with more disposable income, and therefore, more money to spend, which will then prompt businesses to come -up with even more choices, ergo more products, for the ever-fickle consumer, ergo, people with money to spend.
The Philippines’ major imports include electronics, rice and crude oil–obviously very vital commodities. The electronics imports are processed into various semiconductors and other parts which are then exported to various parts of the world (electronics accounts for more than half of the Philippines export earnings), while rice and oil are socially-sensitive staples.
But with imports dropping 31.6% (or -31.6%) versus July 2008, it seems that the virtuous cycle of economic growth is nowhere near getting on high gear.
This doesn’t seem to bode well for the outgoing Arroyo administration–which wants to pride itself on economic know-how, or the incoming administration come July 1, 2010–because the economic woes could undermine or diminish the traditional “honeymoon period” that comes after peaceful elections and turn-over of power.
So what now? Nothing much can be done except to ride this out. Oh, and with the yuletide season coming up, we can expect some glimmers of growth courtesy of increased consumer spending and the influx of dollar remittances of OFWs for the holidays.
Perhaps it might also help the Philippines to focus on growing “from inside,” meaning pump-priming down to the micro-economic level, rather than relying on external demand or trade to keep the economy going. I think the Philippines’ woes stems from the fact that our domestic economy is weak–I mean, heck, we’re not even self-sufficient with our own staple food!
I don’t claim to be an economist, but look at it this way: even the best economic minds in the country and in the world are having trouble with what to do with this debacle.
So what can we simple folks do to help? Buy more Filipino-made and home-grown products. Sure, I admit, many of these products are at times more expensive and offer less value for money, but perhaps we can try. There are a lot of good, locally-made products out there. That way, we can keep the money in the country.
That’s just my two-centavos worth.
Below is the statement from the National Economic and Development Authority on the July imports:
JULY IMPORTS DROP BY 2.0 PERCENT MONTH-ON-MONTH, 31.6 PERCENT YEAR-ON-YEAR
The total merchandise imports in July 2009 dropped by 2.0 percent from the previous month, and by 31.6 from July 2008. This amounted to $4.0 billion, lower than the previous month’s $4.1 billion due to declines in the inward shipments of mineral fuels, lubricants and related materials (-28.6%), and consumer goods (-27.9%).
As July 2009 exports declined by 2.8 percent, trade deficit for the month amounted to US$715 million. Alongside the Philippines, Vietnam and Hong Kong also posted trade deficits in the same month among the trade-oriented economies in East and Southeast Asia.
In his memorandum to the President, Acting Socioeconomic Planning Secretary and NEDA Director-General Augusto B. Santos observed that imports of major economies in the East and Southeast Asian regions posted positive month-on-month gains in July 2009 due to the restored momentum in world
trade and the upturn of the economies in the region. Malaysia registered the biggest month-on-month expansion, owing to the growth in the country’s intermediate goods imports (which was mainly parts and accessories of capital goods).Santos said that cumulatively, imported goods reached only $24.4 billion in the first seven months of 2009, a 31.2 percent decline from the same period last year. He added that matched by a weak export performance, merchandise trade deficit reached $3.9 billion for the period, $1.5 billion less
compared to the same period in 2008.Moreover, while imports of capital and intermediate goods increased, this did not boost total import payments as fuel and food continue to plummet.
Import values of mineral fuels, lubricants and related materials declined by 28.6 percent from June 2009 as petroleum crude (-30.6%) and other mineral fuels and lubricants (-49.1%) dragged down the commodity group. In terms of volume, petroleum crude fell by 35.7 percent, which was compounded
by the decline in world prices of fuel. The average price of Dubai oil fell from $69.41/barrel in June to $64.82/barrel in July 2009.Meanwhile, the 27.9 percent month-on-month decline in consumer goods was due to the drop in food imports (-50.2%) while rice import payments declined by 95.1 percent in July.
“It is essential to note that without the $213 million worth of imported rice in June, total merchandise imports in July would have increased by 3.1 percent on a month-on-month basis,” Santos said adding that dairy products (-5.9%), fish and fish preparation (-12.5%), and fruits and vegetables (-10.6%) also contributed to the negative growth of food imports.
On the other hand, the month-on-month shipments of capital goods expanded by 12.0 percent, bolstered by the growth in payments of power generating and specialized machines (3.6%), office and EDP machines (6.9%), telecommunication equipment and electrical machineries (14.6%), land
transport equipment (24.4%), and optical goods (31.9%). In the commodity group, only aircrafts, ships and boats posted a negative month-on-month growth rate of 20 percent.Likewise, the 14.2-percent month-on-month increase in raw materials and intermediate goods was supported by semi-processed raw materials, which grew by 17.4 percent. Inputs for the manufacture of electrical equipment grew by 21.2 percent as appetite for electronic products recovered.
Conversely, the 4.9 percent contraction of unprocessed raw materials was due to the substantial decline in the import payments of wheat (-82.2%) and tobacco (-29.8%).Japan remained the country’s biggest source of imports with a 13.5 percent share in the total value of merchandise imports in July 2009. The month-on-month increase of orders from Japan posted an 11.8-percent increase due to positive gains in the imports of various commodities, particularly capital goods, which increased by 12.9 percent from June 2009. The US was the second largest supplier of imported goods with an 11.7-percent share. Other major sources of inbound cargos were China (8.8%), Singapore (8.1%), and Taiwan (7.5%).
The value of shipments from China, Hong Kong and Taiwan comprised 19.4 percent of the total merchandise imports. Inward shipments from the rest of the ASEAN region covered 24.3 percent of the value of the total imported goods in July 2009.
Telecommunication equipment and electrical machinery, raw materials for electronic manufactures, and office and electronic data processing (EDP) machines comprised 56.5 percent of total orders from the top import suppliers in July 2009.
Imports from the top five import sources in July increased by 6.3 percent month-on-month but dropped 23 percent from last year, though moderately lower than the preceding month’s 23.3 percent year-on-year contraction.
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