Strong domestic demand and the growing investor confidence in the country will support Philippine imports growth in the near term despite the decline in December 2015, according to the National Economic and Development Authority (NEDA).
The Philippine Statistics Authority reported today that the total payments for imported goods in the country declined by 25.8 percent in December 2015, the steepest monthly year-on-year decline recorded since April 2009 when it fell by 37.1 percent. This halted the six consecutive months of positive growth in imported merchandise.
“Despite this decline in December, strong domestic demand will prop up imports growth in the near term, as we expect continued expansion in inward shipments of power-generating machines, office and electronic data processing machines, and telecommunications equipment. Investor confidence in the country is still growing and is seen to increase investments. This will in turn boost demand for imports of capital goods as well as raw materials and intermediate goods,” said NEDA Deputy Director-General and Officer-In-Charge (OIC) Margarita R. Songco.
In December 2015, the value of imported capital goods, a leading indicator of strong economic activity, remained resilient as it increased 20.9 percent to US$1.5 billion in December 2015. This accounted for 37.8 percent of total merchandise imports for the period.
But the downturn in imports of raw materials & intermediate goods (-53.2%) and consumer goods (-20.3%) pulled down total imports. Import payments for raw materials and intermediate goods declined in December 2015 with lower imports of materials & accessories for the manufacture of electrical equipment (-74.1%) sourced mainly from Taiwan, Japan and Singapore. This partly mirrors the decline in global electronic and semiconductors sales in December 2015 due to softening global demand.
Nonetheless, NEDA sees household consumption remaining strong with upbeat consumer confidence, low inflation, low interest rates, better employment opportunities, and still positive outlook on remittances inflow, which bodes well for imports of consumer goods.
Songco said that although domestic demand is expected to drive imports growth in the near term, sluggish global growth remains to be the downside risk. A downturn in the country’s major trading partners such as Japan and China might drag down imports, particularly intermediate goods used for electronics exports.
“The Philippines’ sound macroeconomic fundamentals should continue to attract attention from investors, both domestic and foreign. The government must pave the way to sustain this renewed interest through institutionalizing reforms from the past five years,” she added.
Among the steps to ensure that reforms are sustained are the passage and implementation of the Philippine Competition Act (RA 10667), the Amendments to the Cabotage Law (RA 10668), and the Tax Incentives Management and Transparency Act (RA 10708) and Customs Modernization Tariff Act, Songco said.
Songco is OIC of NEDA while Socioeconomic Planning Secretary Emmanuel F. Esguerra is on official business abroad.