Revisiting Our Exports
Our economy shows resilience amid various challenges, but one sector that needs further improvement is our exports that lag behind imports in terms of growth.
Boosting our exports will help cure our widening trade deficit and prevent the depreciation of the peso against the US dollar and other currencies.
While we have become a major service exporter, our merchandise goods exports continue to languish. Our monthly imports are now double our exports, and if this gap continues over the coming years, we may deplete our foreign exchange reserves to pay for foreign products.
Strong imports led to a nine-month trade deficit of $46.65 billion, per data from the Philippine Statistics Authority. Such deficit, or the difference between the value of exports and imports, affects our current account—the country’s record of financial transactions with the rest of the world. The Bangko Sentral ng Pilipinas expects our 2022 current account to register a deficit of over $20 billion, or about 5 percent of the gross domestic product.
We import most of our fuel, not to mention food products such as rice, wheat, milk and dairy items, poultry products, and temperate fruits such as apple, pear, grapes and orange whose demand normally peaks in December. The record inflation in many countries made the costs of these products more expensive.
We heavily import crude and refined petroleum products. We purchase vehicles and spare parts made in other countries. Most of the smartphones, tablets, laptops, desktops and other popular consumer electronics are imported. We pay in US dollars or other currencies for these items.
As the peso now hovers between 58 and 59 against the US dollar, or a depreciation of about 12 percent to 15 percent since the start of the year, we have achieved a competitive advantage in terms of product pricing. Thus, it is time to expand our exports and take advantage of the favorable exchange rate.
The renewed focus of President Ferdinand Marcos Jr. on agriculture aims to achieve food security and price stability for the benefit of our people. If we could increase our rice harvest, we may reduce our heavy reliance on rice-exporting countries, such as Vietnam and Thailand. We could even become a net rice-exporting nation one day.
We need to diversify our exports sector to include more products beyond our traditional output, such as coconut, sugar, bananas, garments, furniture, electronics, copper metal and other mineral products.
I hope that one day, we can export finished electronic items, appliances, gadgets, as well as packaged food products, large machinery, cars, vessels and even aircraft. A much more diversified export sector will require major foreign investments and technology transfer. This is why President Marcos visits other countries to discuss investment and trade opportunities with world leaders and executives of multinational groups.
Aside from investments, we need to enhance our branding strategy that will elevate Philippine exports as world-class products, like the ones sold by the US, Japan, Germany, Switzerland and other European countries. European fashion brands, for one, have fetched higher value because of their adept marketing approach that involves promoting a product or crop of a particular region as something unique and endemic to that area.
We have in a way tried to adopt the same approach, like promoting Guimaras mango, Davao’s durian, Marikina’s shoes, Cebu’s lechon, Meycauayan’s jewelry or Angono’s garments. If we could replicate that on a global scale and attach higher value to the products, it would support the growth of our exports.
It should start with patronizing our own products. The rise of online selling proved that Filipinos have money to spend on luxury bags and other fashion items from France or Italy. If we could divert a portion of that spending to Philippine-made products whose prices represent less than a tenth of foreign brands, it will greatly help the local industry.
We should take advantage of several trade agreements, where Philippine products enjoy zero-tariff privileges. These include the Asean Trade in Goods Agreement, Philippines-Japan Economic Partnership Agreement, Philippines European Free Trade Association Agreement and the trade privileges available under the European Union GSP+, where 6,274 Philippine products enjoy zero tariff. We are also in talks with the United States to reauthorize the Generalized System of Preferences program where 3,500 Philippine products can receive duty-free treatment.
Expanding our exports will help us attain high growth, create more jobs and reduce poverty in the country. It should be a part of our near-term, medium-term and long-term strategies. While we have recently expanded our service exports such as IT and business process outsourcing and tourism, we should diversify our merchandise goods exports by rebuilding our agriculture and manufacturing sectors.
We could not allow our merchandise trade deficit to go through the roof. Fortunately for us, we have remittances from overseas Filipino workers that help even our balance of payments. At more than $30 billion annually, remittances support the growth of domestic industries such as banking, real estate, retail and transportation.
Remittances also keep our economy stable and domestic demand strong, especially as we approach the Christmas season.
If we could sustain the expansion of our exports, while keeping OFW remittances, BPO revenues and tourism receipts stable, we may even achieve a balance of payments surplus and make our economy stronger.