Trends in Philippines and global merchandise trade
My Cup Of Liberty
While the Philippines has the fastest GDP growth in the ASEAN, and was the third fastest among the Top 50 largest economies in the world in 2022 and 2023, our merchandise exports remain among the smallest among those Top 50. In 2023, our merchandise or goods exports was only $73 billion (FOB, or Free on Board, value) while Malaysia’s was $313 billion and Vietnam’s was $354 billion.
For merchandise imports, in 2023 the Philippines had $133 billion (CIF, or cost insurance, and freight, value) while Thailand’s was $290 billion, and Singapore’s was $423 billion (see table).
With such a great difference between our exports minus imports, our merchandise trade deficit is big, about $60 billion a year. We somehow compensate for our low merchandise exports with high services exports, like OFW remittances, business process outsourcing (BPO) here, and inbound tourism. The combined value of these three is significant so our current account balance (merchandise plus non-merchandise or services plus primary and secondary incomes) is not suffering too much, with a deficit of $18 billion in 2022 and $11 billion in 2023.
We need to further strengthen our goods or merchandise exports to help finance our necessary merchandise imports like oil, trucks, cars, computers, and electronic products.
One factor why we cannot significantly expand our exports is the low size and capacity of our electricity generation to power big manufacturing plants, warehouses, and storage areas for both raw materials and finished products.
In 2022, the power generation in terawatt-hours (TWh) of the ASEAN-6 were as follows: Indonesia, 333 TWh; Vietnam, 260 TWh; Malaysia, 183 TWh; Thailand, 180 TWh; the Philippines, 114 TWh; Singapore, 57 TWh.
The numbers somehow correspond to the numbers in exports. While Singapore has low domestic power generation, they complement this with power imports from Malaysia, and power use is concentrated in a small land area. Plus, they produce or re-export really high-end, high-value manufactured goods.
Of the global trade picture, China remains the largest exporter in the world with $3.38 trillion in 2023, followed by the US with $2.02 trillion, then Germany with $1.69 trillion.
This has implications on the on-going saber rattling in the Philippines over the territorial dispute with China. The big source of our cheap trucks and buses, cheap tractors and irrigation pumps, cheap computers and electronic products, is China. These goods help improve our farm productivity and transportation, our electronics manufacturing and other products.
And in Europe, Russia is the largest exporter of energy products. Nearly half of its total merchandise exports of $400 billion to $600 billion are gas, oil, and coal. Germany and Italy’s industrial muscle was largely powered by cheap gas from Russia. The economic sanctions they have implemented against Russia have boomeranged on their own economies via higher energy prices, higher inflation, and flattened industrial and manufacturing output.
Considering the trade data in Asia and taking into consideration the lessons of what is happening in Europe economies, the Philippines should prioritize diplomacy over saber rattling, and prioritize trade and investments over war preparations.
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