MANILA -- The Philippines' trade deficit further widened in May to a five-month high as exports shrunk while imports continued to grow, although at a slower annual pace, the statistics agency said.
Imports grew 11.4 percent in May, slower than the previous month's revised 23.1 percent annual pace, while exports declined 3.8 percent in May, less than the previous month's revised 4.9 percent contraction.
That resulted in a trade deficit of $3.7 billion in May, which was wider than the previous month's revised deficit of $3.48 billion and the biggest after last December's $4 billion.
Hefty purchases of fuel, iron and steel, electronic products, telecommunication equipment and electric machinery overseas fueled import growth in May.
Imports were expected to grow 11 percent this year against an earlier estimate of 10 percent, driven by demand for capital and consumer goods, according to the central bank. Exports, on the other hand, were projected to rise 10 percent against an initial forecast of 9 percent.
The import-driven trade gap is expected to worsen the Philippines' current account deficit this year, which could put further pressure on the peso, one of Asia's worst performers so far this year.
The Philippines, like other Asian economies that have external deficits, is under pressure to follow the US Federal Reserve in shifting away from low interest rate settings or risk capital flight as investors seek higher yielding assets.
The central bank raised interest rates last month for the second time in 6 weeks, becoming the region's second central bank to deliver 2 hikes in a short time, after Indonesia.
The Philippine central bank expects the country to end the year with a current account deficit of $3.1 billion, wider than an earlier forecast of $700 million, and higher than the previous year's $2.52 billion gap.
Policymakers have said the current account deficit reflects the Philippines' solid economic expansion, which has driven higher imports of capital goods, raw materials, and other commodity items.
The Philippine economy clocked 6.8 percent annual growth in the first quarter, faster than the fourth quarter's 6.5 percent growth, but short of its 7-8 percent target for the year.