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Oil price increases push import bill up
RIZARRENE S. MANRIQUE, Researcher, BusinessWorld (20 Aug 2004)

PHILIPPINES: The country's total import bill grew significantly in June, boosted by a massive increase in payments for imported mineral fuels and lubricants.

The National Statistics Office (NSO) yesterday said disbursements for foreign-made merchandise climbed by 18% during the month to $3.455 billion.

Payments for imported mineral fuels, lubricants and related products grew by 119.3% to $517.54 million. The commodity's share to the total import bill rose to 15%, in stark contrast to only 8% in June 2003.

In part, an increase in world oil prices jacked up the cost of importing oil commodities during the period.

World oil prices have been touching record highs in recent weeks and oil-importing countries such as the Philippines are bearing the burden.

"As we see from the breakdown [of the import bill], the growth in imports is particularly due to the rising oil prices. The country is oil import-dependent as local [oil] production is inadequate to meet the domestic demand. Our domestic supply of fuel is very limited, so we need to import," analyst Dianne Lorrina S. Sy of Unicapital Securities, Inc. said.

A source who requested anonymity said it indicated a significant surge in demand for the commodity as well.

"Oil-importing industries or companies could have stocked up on inventory to lock in cost inasmuch as they expect oil prices to further rise in the coming months," the source said.

Other commodity groups, meanwhile, posted increases in import value. Capital goods were valued at $1.238 billion, up 7.8% from $1.149 billion previously. It accounted for 36% of the aggregate bill.

This group includes power generating machines, telecommunications equipment, and land transportation equipment except passenger cars and motorcycles, among others.

"The increase in capital goods imports is a good indication that the manufacturing sector or the industries that are heavily importing these items are putting more into capital investments. We may not see the benefits that can be derived from these in the near term but in the medium to long term, there will more or less be an improvement particularly in capacity or production output," Ms. Sy said.

Imported raw materials and intermediate goods consisting of unprocessed raw materials and semi-processed raw materials rose 4.6% to $1.264 billion from $1.209 billion a year before.

Expenditures for consumer goods grew 7.4% to $246.19 million from last year's $229.43, while special transactions, including articles temporarily imported and exported, rose 79.4% to $189.46 million against the prior $105.62 million.

Electronics and components were the top import items for the month. Their value went up by 6.7% year on year, to $1.431 billion from $1.342 billion.

The second top import category in June was mineral fuels, lubricants and related materials; third was industrial machinery and equipment. The latter's import value rose by nearly 18% year on year to $143.13 million from $121.58 million.

In fourth was transport equipment, although value actually fell by 17.7% year on year to $108.13 million from $131.51 million.

Fifth was textile yarn, fabrics and made-up articles, although the June value also fell by 7.9% year on year to $96.66 million from $104.90 million.

Rounding up the list of top imports for June were iron and steel ($76.54 million); telecommunication equipment and electrical machinery ($71.77 million); plastics in primary and non-primary forms ($67.36 million); cereal and cereal preparations ($62 million); as well as organic and inorganic chemicals ($55.10 million).

During the review period, inbound shipment of goods outpaced gross dollar revenue. June exports swelled only by 8.2% to $3.313 billion.

This brought the country's trade balance position to a deficit. The balance of trade in goods deficit amounted to $142 million, reversing the yearago surplus of $132 million. Considering the six months to June stretch, the trade deficit added up to $1.204 billion.


"We can see that the country's trade deficit has ballooned, meaning exports are weakening relative to imports. This perhaps indicates a lower demand for our exports or that the exports of other countries in the region are more attractive," economist Lawrence de Leon of Accord Capital Equities Corp. said.

Mr. De Leon hinted that the Philippines is missing a lot of opportunities as it failed to take advantage of demand other neighboring countries are exploiting at present. "Countries like Singapore, Malaysia and Thailand are posting double-digit exports growth. Further, some Asian economies are posting strong trade surpluses," he said.

Despite this, prospects remain rosy in the coming months on the back of an expected rise in the volume of internationally traded goods.

Ms. Sy said trends could be tied down to the international crude oil prices for the time being, but it is important to see if there is movement in volume as well. "[We have to monitor] one, if there is stability in the foreign exchange and, two, if demand for import or export is stable. Given these, we can expect the balance of trade to be stable."

"For the rest of the year, we can expect imports to further pick up since the demand for consumer goods would increase as we near the Christmas season. On the export side, I would like to believe there would be a recovery as well. Hopefully, if the improvement in trade performance continues, maybe the trade deficit will not be as big as what we have seen in the middle of the year," she added.

Socioeconomic Planning Secretary Romulo L. Neri meanwhile, said bigger production in the coming months is expected as imports remained robust.

"The information and communications technology sector, led mostly by call centers and business outsourcing offices, will continue to expand as shown by the 10% rise in imports of telecommunication equipment and electrical machinery," Mr. Neri said in a statement.

But he noted that the growth of electronic exports may not be as fast as in other Asian countries for the rest of the year. Mr. Neri said he also expects a slowdown in the recovery of the technology sector.

"Technology analysts are warning of a likely correction in global electronics, due to slower inventory drawdowns and slower second-quarter domestic growth in Japan and the US," he said.

The National Economic and Development Authority chief remains optimistic that personal consumption will stay strong as imports of passenger cars and motorized cycles and home appliances expanded by 24.8% and 13%, respectively.

Bienvenido S. Oplas Jr., an economist from private research group Think Tank Inc. said the increase in imports will be good for the economy.

"These products being imported could translate into higher exports the country. It's possible that our exports could increase in the coming months," Mr. Oplas said. -- Beverly T. Natividad with a report from Jennifer A. Ng

Copyright © 2004 BusinessWorld Online, Inc. ALL RIGHTS RESERVED.

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