The Philippines’ deficit in trade of goods decreased for the first time in nearly four years in February as exports decreased while imports fell, according to a report from the Philippine Statistics Authority (PSA) released on Friday.
Initial figures from the PSA indicated that the nation’s goods trade balance — the disparity between export and import values — stood at $3.16 billion compared to a revised $5.12 billion deficit in January and a $3.56 billion shortfall a year ago.
February marked the smallest trade deficit observed in 46 months since the $3.09 billion deficit in April 2021.
Export earnings increased for the second consecutive month by 3.9% to $6.25 billion in February, up from $6.02 billion in the same month last year.
Nonetheless, this growth rate was slower than the revised 6.3% increase recorded in January and the 17.9% escalation observed in February of the previous year.
Simultaneously, imports declined by 1.8% on a year-over-year basis to $9.41 billion in February, reversing the revised 11.2% growth seen in January and the 6.6% increase in February 2024.
This represents the most significant decrease in imports since the 3.3% reduction registered in November 2024.
Year-to-date, the trade deficit in goods widened by 4.6% to $8.28 billion from the $7.91 billion shortfall in the January-February timeframe of the previous year.
Outbound goods sales rose by 5.1% to $12.62 billion in the initial two months of 2025, while imports gained 4.9% to $20.90 billion.
The Development Budget Coordination Committee (DBCC) anticipates a 6% and 5% growth in exports and imports, respectively, this year.
“Reduced imports may be because domestic companies could be postponing their projects in anticipation of rate cuts, leading to less requirement for imported materials in the meantime,” Rischelle Alysha T. Legaspi, an economist at Oikonomia Advisory and Research, Inc., mentioned in an email.
She further suggested that the increase in exports may be due to “other nations accumulating supplies” in light of US President Donald J. Trump’s impending reciprocal tariffs on the global stage.
“I believe it’s partially linked to geopolitical factors… what [Mr.] Trump is doing and his previous actions,” Sergio R. Ortiz-Luis, president of the Philippine Exporters Confederation, Inc., stated in a phone conversation.
Recently, Mr. Trump has threatened to elevate tariffs that the US has already enforced on the European Union and Canada if they continue their cooperation in countering his trade strategies, as reported by Reuters.
Since assuming office at the beginning of the year, Mr. Trump has imposed a 20% tariff on all imports from China and a 25% tariff on steel and aluminum imports.
Vehicles produced outside the United States could face a 25% tariff if the White House proceeds with this plan in the upcoming trade policy announcement scheduled for April 2.
Since initiating its easing cycle in August, the Bangko Sentral ng Pilipinas (BSP) has reduced benchmark rates by a total of 75 basis points (bps), establishing the policy rate at 5.75%.
However, during its first policy meeting of the year in February, the BSP maintained its policy stance, catching market expectations off guard and at the same time indicating fewer rate cuts this year.
Headline inflation in February slowed to 2.1%, with the average inflation rate for the first two months reaching 2.5%, remaining within the central bank’s target of 2-4%.
Manufactured goods, which constituted the majority of the country’s exports, increased by 3.6% to $5.18 billion in February from $5 billion a year prior.
By commodity category, electronic products, representing 56.3% of exported manufactured goods, rose by 2.5% year-on-year to $3.52 billion.
Semiconductors, accounting for 41% of exported electronic products, fell by 4.1% to $2.54 billion.
Exports of other manufactured products surged by 34.6% to $412.60 million, while machinery and transport equipment climbed by 13.9% to $254.62 million in February.
The United States continued to be the leading destination for Philippine exports, with goods shipped valued at $986.84 million, which constituted 16% of the overall total.
Following the US were Japan with $984.76 million (15.7% share), Hong Kong with $873.64 million (14%), China with $646.59 million (10.3%), and The Netherlands with $347.70 million (5.6%).
Meanwhile, imports of raw materials and intermediate goods, accounting for 37.8% of total imports, rose by 1.7% to $3.56 billion in February from $3.50 billion a year ago.
Imports of capital goods increased by 1.8% to $2.61 billion, while consumer goods saw a rise of 7.7% to $1.89 billion.
Within commodity groups, electronic products had the highest import value at $2.11 billion, marking an increase of 9.8% in February from $1.92 billion last year.
The import of semiconductors, which constituted the bulk of electronic products, rose by 14.8% to $1.50 billion.
Conversely, imports of mineral fuels, lubricants, and related materials declined by 23.2% year on year to $1.32 billion, while transport equipment rose by 12.2% to $914.70 million.
China emerged as the largest source of imports in February, delivering $2.46 billion worth of goods, which represented 26.1% of the total import bill.
Japan followed with $841.87 million (8.9% share), Indonesia with $803.17 million (8.5%), South Korea with $671.99 million (7.1%), and the United States with $647.25 million (6.9%).
Analysts expressed optimism about the nation’s potential to meet the government’s growth objectives for imports and exports in 2025.
Ms. Legaspi asserted that the country could achieve the government’s trade targets this year and emphasized the need for further investments in enhancing the manufacturing sector.
“Obstacles to these aspirations may include geopolitical tensions that disrupt supply chains and domestic inflation, which could increase our dependence on imports,” she noted.
“At this point, we remain uncertain about the US’s actions. Therefore, a significant factor will be what the US decides to do,” Mr. Ortiz-Luis remarked.
In a research note, Chinabank Research stated that external demand may continue to be subdued, faced with risks from significant uncertainty due to an intensifying global trade conflict and heightened US tariffs.
They also mentioned that a potential economic slowdown in major trading partners like the US and China could be influential.
“This trade deficit could widen this year as prospective changes in the global trade landscape may harm export demand,” Chinabank Research added. — M.M.L. Castillo
