The Philippines’ exports and imports would take a hit from muted global demand coupled with penny-pinching domestic consumers amid high prices, said Moody’s Analytics.
“Trade will be weak over coming months as foreign households pull back spending,” Moody’s Analytics said in a July 14 report released on Monday. This was despite a surprise 1.9 percent exports growth in May which ended five straight months of year-on-year drops, the think tank said, citing the government’s latest external trade data.
Also, “high borrowing costs and elevated inflation will pinch local households, hurting imports,” Moody’s Analytics added.
Filipinos are mostly dependent on imported consumer goods, but the value of merchandise goods from abroad fell 8.8 percent last May, extending import declines to four consecutive months.
Private sector and household consumption accounted for about three-fourths of the Philippines’ economic output.
Even as it tempered borrowings and spending, the prevailing high interest rate environment resulting from the Bangko Sentral ng Pilipinas’ (BSP) cumulative 425-basis point (bp) policy rate hikes to temper skyrocketing inflation was “working,” Moody’s Analytics said in a separate report last July 7.
“Price growth in the Philippines is clearly slowing” as shown by the 13-month-low headline inflation rate of 5.4 percent in June, the think tank said.
However, inflation was expected to cool at a slower pace moving forward, Moody’s Analytics said, since “much of the softer reading reflects a high base effect” from the price jumps wrought by the prolonged COVID-19 pandemic and Russia’s invasion of Ukraine last year.