Philippine export outlook still ‘murky’ for 2012

Imports rose by 10.4% YoY in August, up from 6.6% in the preceding month. While a higher
level of imports is generally not positive for the economy, a breakdown of the headline number suggests otherwise.

Firstly, capital goods rose by 10.2% MoM in August, even after a 19.1% increase in July. The total value reached USD 1.43bn (the highest level in nine months). Secondly, imports of raw materials rose for the second consecutive month. In particular, electronics imports were up by 19.5% MoM in August, after a 1.7% increase in July. This suggests that the seasonal pickup in electronics exports may start to appear in the last few months of the year.

The increase in capital goods and raw materials were sufficient to offset a drop in mineral fuel and lubricants imports (imports from this category fell after a oneoff spike in July), leading to a minor 1.5% drop in total imports. Overall there is cause for optimism in the import numbers in the short term. However, the export outlook for 2012 is still murky and domestic demand may not be sufficient to carry the slack from weak external demand. We are comfortable with our 4.6% GDP growth forecast for 2011 and see downside risks to our 5.2% GDP growth forecast for 2012.