PSA (Philippine Statistics Authority) has reported that the hemorrhage on the current account of this country’s BOP (balance of payments) continued unabated in July. The current account is accounted for largely by the balance of Philippine merchandise trade. In the first seven months of 2018 this country’s total imports of merchandise exceeded its total exports by $22.49 billion. The 2017 seven-month figure was just over $13 billion.
To put it in perspective, the $22.49-billion deficit figure represents approximately 10 months’ worth of OFW (Overseas Filipino workers) remittances. Our Bagong Bayani cannot be blamed for saying that their hard work away from home is not being matched by a commensurate foreign-exchange-earning effort on the part of DTI (Department of Trade and Industry) and this country’s producers of goods.
The trend of the balance of merchandise trade is nothing short of alarming. At its current rate of increase, the merchandise trade deficit could conceivably reach $40 billion by the end of 2018. Imports of goods for the Christmas trade are starting to exacerbate the problem.
The most disturbing aspect of the present merchandise trade situation is that, while the Duterte administration’s infrastructure people have their Build Build Build import plans all set, its economic team—the heads of DTI, NEDA (National Economic Development Authority), DOF (Department of Finance), DA (Department of Agriculture) and DBM (Department of Budget Management)—don’t appear to have a firm idea as to where the needed incremental merchandise exports will be coming from.
Consider the statement issued recently by the Security of Socio-Economic Planning (and NEDA Director-General) Ernesto D. Pernia in the wake of PSA’s announcement of the seven-month merchandise trade outturn.
“(T)he government needs to fast-track the crafting of the Ease of Doing Business Act’s implementing rules and regulations,” Dr. Pernia said in his statement. “(T)o boost exports, there is a need to promote forward and backward linkages,” he said. “This (will be) through the Agribusiness Support and Investment in Regional Expositions, which integrates marketing development support services to farmers, fisherfolk and MSMEs and (through) linking exporters to source of export financing.”
Dr. Pernia went on to say this: “(T)he high cost of domestic and international shipping and cargo handling also needs to be addressed.”
Fast-tracking of the drafting of rules, promotion of forward and backward linkages, integration of marketing development support services, lowering of the high cost of shipping and cargo handling—this is language that we have all heard before. It is soft, impractical, no-sense-of-urgency language. It sounds good, but that’s about it. Considering that there is a monster of a merchandise trade deficit staring Juan dela Cruz in the face, a tougher, more creative and with-great-sense-of-urgency approach is needed from this country’s economic managers.
In all fairness to him, revving up Philippine export trade is not the primary responsibility of Secretary Pernia. Than primary responsibility belongs to the Secretary of Trade and Industry, Ramon Lopez.
By now Mr. Lopez and his people should have pinpointed the industries and specific products capable, with all-out government support, of narrowing, if not closing, the ever-widening merchandise trade gap. Unfortunately, Mr. Lopez has done nothing of the sort. Indeed, the feeling is inescapable that DTI really has nothing to offer the nation by way of export trade energization.
In the meantime, the worsening of the BOP puts downward pressure on the peso, with consequential effects on the inflation rate, and the cost of servicing the nation’s external de and the Philippines credit rating. A truly bad state of affairs.