Imports expected to contract in 2023 on weak demand

Imports are projected to end 2023 in negative territory and reverse last year’s impressive growth, reflecting anemic demand from both consumers and businesses at home which could drag economic growth.

From the previous expectation of a 2-percent growth, the Marcos administration now projects imports of goods to decline 3 percent year-on-year in 2023, according to latest macroeconomic assumptions of the interagency Development Budget Coordination Committee (DBCC).

If the prediction comes true, it would be a turnaround from the 17.4-percent expansion recorded in 2022.

While imports are not included in the computation of gross domestic product (GDP), they are nonetheless an indicator of demand especially in an economy like the Philippines that is reliant on consumption to power up growth.

Despite the pessimistic outlook, the DBCC still retained its GDP growth target for 2023 at 6 to 7 percent.

‘Masking weakness’

Government data showed imports only posted positive growth once this year, in January. They remained in the red until October, when inbound shipments managed to narrow their year-on-year contraction to 4.4 percent, from the 14.1 percent slump recorded in the preceding month.

Miguel Chanco, economist at Pantheon Macroeconomics, said that while the import bill improved in October, most of the growth came from elevated global commodity prices and not from an actual resurgence in demand.

“What’s disheartening from the standpoint of economic activity, though, is that most of this bounce-back appears to have been driven primarily by commodity price effects, as imports of commodities, minerals and fuel saw a double-digit leap,” Chanco said in an emailed commentary.

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“This masked continued weakness in imports of capital and consumer goods,” he added.

Based on the DBCC’s latest projections, imports are expected to return to growth at 7 percent next year on the back of stronger infrastructure investments and increased domestic production capacity.

The new forecast for 2024, however, was less optimistic than the old projection of 8 percent import expansion.

The DBCC retained its imports growth projection for 2025 to 2028 at 8 percent on “anticipated increase in demand and trade activities globally and domestically.” INQ