Department of Finance sees lower trade deficit helping to sustain investment-led growth

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MANILA – The lower trade deficit recorded as of August this year is seen to help narrow the country’s balance of payments (BOP) deficit, which will, in turn, help sustain the government’s goal of investment-led growth, according to the Department of Finance (DOF).

The trade deficit improvement will make it possible to reverse the current account shortfall and temper the depreciation of the peso, a DOF press statement added.

In the first eight months of 2017, the country’s merchandise trade deficit continued to shrink, declining to 9.2 percent of GDP (approximately US$17.046 billion) compared with 9.8 percent of GDP ($17.501 billion) in the previous year, DOF Undersecretary and Chief Economist Gil Beltran said.

In the latest Economic Bulletin on the Trade Balance issued by his office, Beltran also noted that merchandise export sales rose by 13.3 percent, reaching $42.106 billion as of August.

Major export items also grew at double-digit rates, including electronics, which was up 10.9 percent; machinery and equipment, 27.9 percent; and garments, 16.2 percent.

“Meanwhile, merchandise imports rose by 8.2 percent to $59.15 billion, slowing down from a blistering 18.4 percent growth last year, despite double-digit increases in the imports of capital goods,” Beltran said.

Imports of specialized machinery and office equipment for the period was up 12.7 percent, while machinery and transport equipment rose 11.7 percent the correction in prices of mineral fuels was 34.9 percent.

“The lower trade deficit will moderate the BOP deficit, possibly reverse the current account deficit and temper the peso depreciation,” Beltran said. “This will help sustain investment-led growth.”