The country’s trade deficit widened to a record $58.32 billion in 2022 as imports surged amid high commodity prices, preliminary data from the Philippine Statistics Authority show.
Merchandise imports climbed 17.3 percent to $137.16 billion in 2022 and outpaced the 5.6-percent increase in exports to $78.84 billion.
This resulted in a 38.1-percent rise in trade deficit to $58.32 billion from $42.23 billion in 2021. It was also larger than the trade gap of $24.50 billion in 2020.
The trade deficit weighed on the peso which hit an all-time low of 59.0 against the US dollar in October, before recovering in the succeeding months on the back of higher remittance inflows. The peso closed at 54.40 Thursday.
London-based think tank Oxford Economics said global headwinds might affect the external trade of the Philippines in 2023.
“We think 2023 will be a difficult year for the Philippines’ economy. On domestic front, initial boost from pent-up demand will start to fade in the coming quarters. At the same time, although easing, elevated inflation will continue to strain real purchasing power. Slowdown in the global economy will also weigh on goods exports, which in turn will weigh on investment appetite of export-oriented manufactures,” Oxford Economics said.
The PSA reported that the gross domestic product of the Philippines expanded by 7.6 percent in 2022, faster than 5.7 percent in 2021.
The PSA said that in December, the trade deficit reached $4.60 billion, as exports declined 9.7 percent to $5.67 billion and imports fell 9.9 percent to $10.26 billion. The December deficit was narrower than the $5.117-billion shortfall recorded a year earlier.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the narrower trade deficit was brought about by the sharp decline in exports amid the lower global commodity prices that reduced the value of some export items.
Ricafort also cited the “risk of recession in the US that reduced some demand for exports, and the COVID restrictions earlier in 2022 in China.”
“The significant narrowing in the trade deficit data in recent months [especially since October 2022] may have fundamentally helped stabilize and even improved the peso exchange rate,” he said.
Ricafort said the narrower trade deficit in December might also be caused by lower global crude oil prices which were still among one-year lows at $80 per barrel for the Nymex crude oil benchmark.
He said other major global commodity prices such as natural gas (new 1.5-year lows recently), wheat, soybean, coal, iron, steel, copper and nickel also started to ease in recent months.
He said these “could help reduce the country’s import bills, narrow the trade deficit as well as help ease inflationary pressures/overall inflation for the coming weeks/months, as leading indicators for both trade deficit/net imports and overall inflation.”
