Export growth to slow: DBS

THE PHILIPPINES may find it difficult to sustain its streak of positive export growth this year due to sluggish global demand and base effects from 2014, an analyst at DBS Bank Ltd. yesterday said.

Semiconductors, which comprised the biggest share of electronics exports at 38.1%, decreased by 6.9% year on year to $1.785 billion.

In a regional outlook report, DBS Bank economist Gundy Cahyadi said: “After averaging 8.7% in the last 3 years, export growth may be barely in the positive for this year.”

“High base effects certainly played a part, but the current state of global demand also means it is getting harder to sustain high export growth year after year,” he explained.

Nevertheless, Mr. Cahyadi noted that the outbound shipment of Philippine-made electronics — the country’s top export product — continues to expand at a “pretty decent pace, about 3% in the year-to-date.”

“This has been the positive structural shift since 2011. Sustained strength in the overall manufacturing sector will help ease some burden off from services and construction sectors,” he said.

Exports of merchandise goods posted their worst decline in over three years in May, plunging by 17.4% annually to $4.899 billion, amid a huge drop in electronics exports. That pace of expansion was the steepest decline since an 18.9% fall in December 2011 — from the revised $5.932 billion a year earlier.

Electronic products, which accounted for 48.1% of total export earnings, fell 7.5% to $2.357 billion in May. Semiconductors, which comprised the biggest share of electronics exports at 38.1%, decreased by 6.9% year on year to $1.785 billion.

That compares with a 5%-7% 2015 growth target of the Semiconductor & Electronics Industries in the Philippines, Inc.

For the first five months of the year, overall merchandise exports dropped 5% — against an official 5% full-year growth target — to $23.526 billion.

During the same period, electronics exports grew by 3% to $10.915 billion from the $10.606 billion logged in the comparative 2014 period. Semiconductors likewise jumped by 7% to $7.841 billion from $7.324 billion in January-May.

Emmanuel F. Esguerra, National Economic and Development Authority officer-in-charge and deputy director-general, said in a July 10 statement: “The recent outturn of Philippine exports, as well as in many Asian economies, reflects the general market outlook and consensus in the near term, signaling a slowdown of the global economy.”

“Slowdown in global trade due to the weakening of China as well as the fiscal crisis in the euro zone will certainly spill over globally, although the magnitude of the impact remains to be seen,” Mr. Esguerra added.

“Policy makers should remain vigilant on the possible outcome of these external developments and how they may impact the trade competitiveness of the country as well as the domestic economy.”

However, Mr. Cahyadi said he does not expect the Bangko Sentral ng Pilipinas (BSP) to tweak its policy settings in the near term.

“It is interesting to see, however, if the central bank will spend more time discussing the relative strength of the peso,” he noted.

The BSP has stayed neutral on monetary policy since Oct. 23 last year amid firm inflation expectations and strong growth prospects.

Overnight borrowing and lending rates have been kept steady at 4.0% and 6.0%, respectively; special deposit account rates at 2.50%; and banks’ reserve requirement ratios at 20%.

The policy-making Monetary Board of the BSP is scheduled to meet for its fifth rate review for the year on Aug. 13. –Daryll Edisonn D. Saclag, Senior Reporter, Businessworld