Manila, Philippines – The Philippines‘ trade deficit stayed well above $3 billion for the fifth month in a row in August as sustained purchases of capital goods to feed the government’s infrastructure overhaul kept import percentage growth at double-digits, outpacing exports.
While the infrastructure investment bodes well for the Southeast Asian economy in the long term, economists say the wide trade gap will continue to pressure the peso which has been stuck near 13-year lows against the U.S. dollar.
Exports grew 3.1 percent from a year ago to $6.16 billion in August and imports rose 11 percent to $9.68 billion, reflecting increases in purchases of transport equipment and iron and steel, the Philippine Statistics Authority said on Wednesday.
Exports in January to August dropped 2 percent and imports increased 15 percent.
The trade deficit reached $3.513 billion, compared with $3.546 billion in July. In August 2017, the trade gap was $2.737 billion.
The Philippines has been posting large trade gaps since last year, widening its current account deficit and adding pressure on the peso, which weakened to 54.24 against the dollar at one point on Wednesday, from Tuesday’s 54.15.
As the trade gap remains wide “this is positive for the growth outlook of the economy, but medium term this implies that there will continue to be upward pressure on the dollar/peso,” said Bank of the Philippine Islands economist Emilio Neri.
The weak peso has also helped push domestic inflation, which in September reached a near decade high of 6.7 percent. That could prompt the central bank for another rate hike before the end of the year, said Neri.
The central bank has raised its benchmark rates by 150 basis points since May and has two more policy meetings left this year.
The central bank expects imports to grow 11 percent this year, driven by demand for capital and consumer goods as the government builds new airports, ports and highways. Exports are forecast to rise 10 percent.