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Philippines’ Trade Deficit Hits Worst in 5 Months, Risks Hurting Peso

The Philippines’ trade balance is deteriorating, with the country recording its biggest trade deficit in five months in January as exports slumped sharply. This could put pressure on the Philippine peso in the near term.

According to preliminary data released by the Philippine government on March 14, the trade gap in January widened to $5.74 billion, the largest since August’s record monthly deficit of $6 billion in 2022.

Exports fell the most in nearly three years, plunging 13.5 percent to $5.2 billion in January, compared to the previous year, while imports rose 3.9 percent to $11 billion in January, the first month in three months that imports increased.

ING, the Dutch banking and finance company, estimated the trade gap in January at $4.3 billion. Nicholas Mapa, senior economist at ING, warned that “The ongoing trade deficit in the Philippines points to pressure on the depreciation of the peso in the near term.”

The Philippine government has been struggling to contain the trade deficit, which has been widening due to sluggish exports and higher oil prices. The government has implemented measures to address this, including offering incentives to exporters and promoting investments in the manufacturing sector. However, it remains to be seen whether these measures will be enough to reverse the trend.

With the trade deficit continuing to widen, analysts warn that the Philippine peso could come under increasing pressure in the coming months. This could have implications for the country’s economy, particularly if it leads to higher inflation and a slowdown in economic growth.

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