Philippine merchandise exports will stay subdued amid weaker economic prospects for major export markets, including the United States, Japan and the People’s Republic of China, according to a report by the Asian Development Bank (ADB).
The Asian Development Outlook (ADO) September 2023 also sees the current account deficit narrowing from 2022, supported by the strength in service exports and steady growth in remittances from overseas workers.
The ADB report said net exports weighed on the Philippine gross domestic product (GDP) growth in the first half of 2023, as merchandise exports declined by 8 percent in real terms on weak external demand while merchandise imports also fell though to a lesser extent by 2.4 percent.
It attributed the decline in merchandise imports partly to the subdued demand for raw materials and components for export-oriented manufacturing, as well as the slowdown in domestic demand.
“Strong services exports (14.8% higher in H1 2023), driven by tourism and business process outsourcing partly cushioned the merchandise trade deficit,” it said.
The report said services largely fueled the growth in GDP with broad expansion across major subsectors.
Transport, accommodations and restaurants sustained double-digit growth on buoyant tourism. Growth in retail trade, accounting for nearly a fourth of total services, remained buoyant at 6.6 percent as well as in finance (6.9 percent) and professional and business services (7.2 percent), it added.
The ADB report said a slowdown in global demand is holding back exports in developing Asia’s economies, particularly for electronics and semiconductors.
“Sales of semiconductors continue to decline, but the decline appears to be bottoming out. With the slowdown in global demand, semiconductor sales fell sharply in late 2022 and the trend has largely continued this year,” it said.
The report cited the World Semiconductor Trade Statistics expecting a 10.3-percent contraction in global sales for this year, deeper than the 4.1 percent expected earlier this year, with the steeper-than-expected downturn in this market.
However, the uptick in the growth of global semiconductor sales averaged over three months suggests the downturn started to bottom out in June, it added.