The Philippines' trade deficit widened to nearly $6 billion in July, as both electronics imports and exports continued to climb, according to data from the Philippine Statistics Authority (PSA).

The country's trade-in-goods balance — the difference between exports and imports — posted a $5.97-billion deficit in July, up 34.9% from the $4.43-billion gap recorded a year earlier. Month on month, the shortfall ballooned from a revised $5.5 billion in June. The July figure marked the widest trade deficit in two months, since the $6.1-billion gap in May. The Philippines' trade balance has now been in deficit for more than a decade, or since the $64.95-million surplus recorded in May 2015 — a structural pattern that reflects the country's longstanding dependence on imported fuel, raw materials, and intermediate goods to feed its export factories and domestic consumption.

Imports surged 19.8% year on year to $14.12 billion in July, from $11.78 billion a year ago, though they slipped 1.4% from $13.32 billion in June. Merchandise exports jumped 10.8% to $8.15 billion from $7.36 billion a year earlier, but slid 7.7% month on month from $8.83 billion in June. Persistent trade gaps are a wider feature of Southeast Asian economies that import components for assembly-led export sectors, and for the Philippines the imbalance is typically offset in the country's external accounts by remittances from overseas Filipino workers, business-process outsourcing revenue, and tourism receipts.

For the first seven months of the year, the trade deficit ballooned 29.2% to $37.34 billion, from $28.91 billion in the same period a year ago. Exports for the seven-month period rose 12.9% to $54.92 billion, while imports grew 18.9% to $92.26 billion as of end-July.

Electronics Lead Both Sides of Trade

"Electronics remain the heavyweight of Philippine trade, driving both export growth and demand for imported components. The sector is powering export growth, but its heavy reliance on imported components is also widening the trade deficit, with electronic inputs now rivaling oil as a major import item," Chinabank Research said in a note.

Electronic products accounted for 58.8% of total exports, or $4.79 billion, followed by other manufactured goods at $371.46 million (4.6%) and other mineral products at $366.26 million (4.5%). Semiconductor exports, which made up more than half of electronic exports, rose 26.1% to $3.7 billion. The Philippines hosts a large semiconductor assembly, test, and packaging industry, and its export performance is closely tied to global demand cycles for chips and electronic devices.

Chinabank noted that the electronics sector remains heavily reliant on imported electronic components, which "highlights an opportunity for the Philippines to deepen domestic electronics manufacturing and capture more value from the sector." It flagged a new round of semiconductor tariffs from the US government as a risk to the sector's growth — a concern amplified by the fact that the United States is the country's single largest export market.

"The global AI boom presents an opportunity to deepen local manufacturing and move up the value chain, allowing the Philippines to capture more of the gains for the electronics upcycle," Chinabank said.

By type of export goods, manufactured goods made up 81.1% of the total at $6.61 billion in July, followed by mineral products at $776.61 million (9.5%) and agro-products at $548.95 million (6.7%).

"Agricultural exports fell for a second straight month, weighed down by lower shipments of fruits, vegetables, and coconut products. Typhoons and El Niño-induced dry spell pose risks to agricultural output. Mineral exports also declined, particularly copper shipments," Chinabank said.

The United States was the top destination for Philippine-made goods in July, absorbing $1.68 billion or 20.7% of total exports. It was followed by Hong Kong with $1.29 billion (15.9%), China with $919.82 million (11.3%), Japan with $856.6 million (10.5%), and Singapore with $401.17 million (4.9%).

Import Bill Driven by Electronics and Fuel

On the import side, electronic products posted the biggest value among commodity groups, surpassing energy imports. Electronic product imports surged 61.3% to $4.6 billion in July, making up 32.6% of the country's import bill.

Imports of mineral fuels, lubricants and related materials, which accounted for 13.8% of July imports, jumped 34.8% to $1.95 billion, mainly due to higher oil prices. The Philippines is a net energy importer, leaving its import bill sensitive to movements in world crude prices.

Cid L. Terosa, an associate professor of economics at the University of Asia and the Pacific, said in an email that the conflict in the Middle East will likely keep pushing global fuel prices higher.

"The combination of a weaker peso and volatility in global oil markets will continue to sustain the higher costs associated with our imports of mineral fuels and lubricants," he said.

By type of goods, imports of raw materials and intermediate goods accounted for 40.4% of total July imports at $5.71 billion, followed by capital goods at $3.84 billion (27.2%) and consumer goods at $2.58 billion (18.3%).

"Consumer goods imports posted modest growth (+5.5%). Demand for durable goods softened, with motor vehicle imports slowing to +6.2%, while home appliance imports declined for a 10th month. Among non-durable goods, rice imports surged (+65.9%), likely to bolster domestic supply ahead of the anticipated impact of El Niño," Chinabank said.

China remained the top source of Philippine imports in July with $4.17 billion, or 29.5% of the total, followed by South Korea with $1.8 billion (12.7%), Japan with $1.11 billion (7.9%), Indonesia with $807.75 million (5.7%), and the United States with $766.61 million (5.4%).

— Pierce Oel A. Montalvo