June 8, 2018 / 2:23 AM / 8 months ago

Philippines' trade deficit widens sharply in April as imports surge

MANILA, June 8 (Reuters) - The Philippines’ trade deficit widened to a four-month high in April on robust purchases of capital and consumer goods abroad and as weak demand overseas dented exports, the statistics agency said on Friday.

The trade gap swelled 43 percent to $3.62 billion in April versus March as demand for telecommunication and transport equipment, and iron and steel, saw imports rising by a near two-year high of 22.2 percent.

Sluggish demand from top trading partners Japan and China caused exports to shrink 8.5 percent, which was the biggest decline since July 2016. Exports to Japan and China dropped 30.2 and 4.6 percent, respectively.

However, there were some bright spots on the exports side, with shipments to the United States up 14.1 percent in April.

The rise in imports was partly driven by the government’s $180 billion programme to overhaul the country’s outdated infrastructure to lift economic growth and attract investments.

The import-driven trade gap could worsen the current account deficit, which will put further pressure on the peso, Khoon Goh, head of Asia research at ANZ, said in a tweet.

The peso was hovering near 12-year lows against the dollar after the data was released. It remains Asia’s worst performing currency.

The central bank has forecast a current account deficit of $700 million this year or 0.2 percent of GDP, narrower than last year’s deficit of $2.5 billion, which accounted for 0.8 percent of the country’s gross domestic product (GDP). The 2016 deficit was 0.4 percent of GDP.

Policymakers have said the current account deficit reflects the Philippines’ solid economic expansion, which has driven higher imports of capital goods, raw materials, and other commodity items.

The Philippine economy clocked 6.8 percent annual growth in the first quarter, faster than the fourth quarter’s 6.5 percent growth, but short of its 7-8 percent target for the year. (Reporting by Karen Lema and Enrico Dela Cruz; Editing by Sunil Nair)

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