By DES FERRIOLS
The Philippine Star
The Bangko Sentral ng Pilipinas (BSP) expects the country’s trade deficit to hit $11.5 billion this year because of surging oil prices and the projected increase in food imports, particularly grains.
In 2007, the country incurred a deficit of $8.2 billion.
"It’s both because of volume and value of imports which we expect to increase this year," said Illuminada Sicat, director of the BSP’s Department of Economic Statistics (DES).
According to Sicat, the BSP expects exports growth to slow down to five percent this year but imports are projected to surge by 10 percent, creating a larger gap than last year.
Sicat said the BSP had originally projected the trade deficit to reach only $8.7 bilion this year, inching up only marginally from last year’s deficit level.
But she said the increase in petroleum prices would push this gap wider.
Already, the trade deficit was recorded at $531 million in April, with imports increasing by 11.8 percent to hit $4.855 billion, while exports grew by only 4.9 percent to $4.325 billion.
For the first four months of the year, the National Statistics Office (NSO) said the trade deficit stood at $2.6 billion compared to a deficit of $179 million in the same period last year.
Sicat said the slowdown in exports would be due to the 3.2 percent decline expected in the electronics sector which accounted for over two-thirds of the country’s total exports.
The NSO also reported that electronics imports, which accounted for a third of the import bill in April, fell 10.7 percent to $1.594 billion.
The decline in electronics imports—an import-dependent industry—was also indicative of future output and exports that Sicat said had been dampened by softer demand in developed market.
Sicat said the increase in imports in general would be due to higher oil and petrol imports as well as food, with the government stockpiling grains to avert the expected supply shortage during the lean season.
The NSO said that in April alone, food imports jumped sharply, with cereals and cereal preparations registering a 222.9 percent increase to $239.95 million or 4.9 percent of the bill.
Because of the slowdown in exports and increase in imports, together with the slowdown in investments, the BSP had earlier trimmed its projected balance of payments for the year from a $4.6 billion surplus to a more modest $2.5-billion surplus.
The balance of payments reflects the country’s transactions with the rest of the world paid out of the gross international reserves or GIR which was projected to reach record levels of $35 billion to $37 billion this year.
The size of the country’s BOP surplus is also an indication of the BSP’s comfort level in shielding the peso from excess volatility in the market.
Although still a surplus, however, the emerging 2008 BOP projection would be 26.4 percent lower than originally expected and about 70 percent lower than the actual 2007 surplus.
The BSP’s original BOP projection was already conservative but officials said estimates needed to be adjusted further to account for the impact of the turmoil in the financial markets and the rapid increase in food and oil prices.
Although the BSP expected oil prices to continue going up this year, no one expected that prices would even touch $130 per barrel, let alone the $137 per barrel level that it eventually reached last month.
Moreover, an unexpected turn in the food sector had the government importing rice amid criticism that the surge in prices were largely self-inflicted when agriculture officials announced they were importing large quantities from a very thin market where the Philippines was the single biggest buyer.