Economists see slower export growth in H2

The truck ban imposed in the city of Manila and a slowing world economy will likely dampen the country’s exports growth in the second half of 2014, thus, diminishing the export sector’s contribution to economic expansion for the year, local economists said.

This is despite the 6.9-percent export growth in May 2014 based on preliminary data released by the Philippine Statistics Authority (PSA) on Thursday. The country’s total revenues from exports rose to $5.5 billion during the period from $5.1 billion last year.

“I am not optimistic that we can maintain double-digit growth in H2 [second half)]primarily because of the city of Manila’s truck ban, which is wrecking havoc on both importers and exporters and even simply interisland logistics,” University of Asia and the Pacific’s (UA&P) Victor Abola said.

Further, UA&P School of Economics Vice Dean Cid Terosa said port congestion in Manila is compounding the existing problem with the truck ban. This is going to slow the trade of goods to and from Manila.

“I’m worried about port congestion and the truck ban, both of which have held up the inflow of inputs for exports,” Terosa said. “Inbound shipments of both consumer and producer goods have been slowed down by port congestion and the truck ban.”

Apart from local factors, a slower global economy will also likely affect the country’s export earnings in the coming months. Former Budget Secretary Benjamin Diokno said these fears are based on expectations by the International Monetary Fund (IMF) of a slowing world economy this year.

Diokno added that, with these, he does not expect the country’s export earnings to play a major role in helping the Philippine economy post higher growth this year.

The contraction in May shipments of the country’s top export, Electronic Products, may already mirror the problems with the truck ban and the slower global demand. PSA data showed outward shipments of Electronic Products contracted 1.6 percent to $2.05 billion from $2.08 billion registered in May 2013.

The decline posted by Electronic Products was due to the double-digit contraction in exports of Semiconductors. Data showed that export earnings from the shipment of semiconductors declined 18.1 percent to $1.43 billion in May 2014 from $1.748 billion recorded last year.

“[There’s] a positive demand, but export supply may be constrained by truck ban as Seipi [Semiconductor and Electronics Industries in the Philippines Inc.] has earlier commented,” Abola said.

For its part, the National Economic and Development Authority (Neda) believes the near-7 percent exports hike in May indicates a positive outlook for export growth in the second half of 2014. Neda Deputy Director General Emmanuel F. Esguerra explained that the positive outlook stems from the growth in the export of manufactured goods. This, he added, also indicates “stronger global manufacturing activity.”

However, Esguerra cautioned that the prolonged dry spell could affect expansion, particularly for the food sector.

“However, while overall export outlook for the year is positive, sales in total agro-based exports may decline due to the adverse impact of a possibly prolonged dry spell in the coming months,” Esguerra said. Other contributory factors include negative outturns in shipments of coconut products.

To counter these negative factors, Esguerra reiterated the need to maintain policies that are supportive of higher exports growth. He also added the power issue must also be addressed to boost the country’s manufacturing sector.

These efforts, Esguerra said, will help the country meet the 2014 target of $69 billion worth of export earnings as indicated in the Philippine Development Plan Midterm Update.

“In the short-term, efforts must be intensified to help the areas vulnerable to the adverse impact of a prolonged dry spell. Measures to contain the spread of coconut scale insect must also be stepped up. Moreover, the capacities of exporters to improve product quality and packaging in line with internationally accepted standards and practices must be enhanced,” Esguerra said.

“In the long term, to ensure the sustainability of manufacturing exports, the government needs to intensify the Industry Roadmapping Project. This includes the ongoing Manufacturing Resurgence Program, complemented by continuing measures to improve the country’s business climate, as well as to increase overall productivity and innovative capacity,” he added.

Data showed that the Philippines’s top export markets in May 2014 are Japan, including Okinawa, which cornered 20.4- percent share to total exports for May 2014, followed by the People’s Republic of China with 17.5 percent; and United States, including Alaska and Hawaii, with a 13.7-percent share.

Exports to Japan amounted to $1.120 billion, or a 6.1 percent from $1.056-million recorded value in the same month a year ago. Shipments to China, on the other hand, amounted to $958.86 million or a growth of 51.3 percent from $633.77 million a year ago.

Products shipped to the US amounted to $749.50 million in May 2014. This recorded an increase of 9.2 percent from $686.09 million in the same month last year. –Cai U. Ordinario, Businessmirror