Trade deficit balloons in May as imports jump

By Beatriz Marie D. Cruz, Senior Reporter

THE Philippines’ trade-in-goods deficit widened to $5.48 billion in May from a year ago, as imports grew faster than exports, according to the statistics agency.

Preliminary data from the Philippine Statistics Authority (PSA) showed the trade-in-goods balance — the difference between exports and imports — widened by 50.5% to $5.48 billion in May from $3.64 billion recorded in the same month a year ago.   

Month on month, the trade gap narrowed from the revised $6.43 billion in April.

May saw the smallest trade gap in two months or since the $5.04-billion deficit in March.

The country’s trade balance has been in deficit for more than a decade or since the $64.95-million surplus recorded in May 2015.

Merchandise imports jumped by an annual 21.9% to $13.36 billion in May, a turnaround from the 0.9% dip in the same month a year ago but slowed from the 27.3% rise in April.

However, the import value was the lowest since $13.23 billion in March, while growth was also the slowest since 17.1% in March.

On the other hand, total outbound sales of Philippine-made goods rose by 7.6% to $7.87 billion in May, slower than the 15.5% increase a year ago but slightly faster than 7.2% growth in April.

PSA said export sales in May were the highest since $8.19 billion in March. Export growth was also the fastest in two months or since 20.8% growth in March.

Former University of Asia & the Pacific School of Economics Dean Francisco Cid L. Terosa said in an e-mail that the May trade deficit widened as buyers front-loaded imported production inputs due to geopolitical uncertainties and supply-chain disruptions.

In the January-to-May period, the trade-in-goods deficit widened by 25% to $25.24 billion from $20.08 billion a year ago.

For the five-month period, imports rose by 16.2% to $63.11 billion from $54.32 billion a year ago.

The total value of exports jumped by 10.6% to $37.87 billion in the five-month period from $34.25 billion a year ago.

PSA said these were the highest import and export values recorded since the series began in 1991.

The Development Budget Coordination Committee expects 3% growth in exports and a 5% increase in imports this year.

CAPITAL GOODS DEMAND
PSA data showed imports of raw materials and intermediate goods grew by 33.1% to $5.46 billion in May, making up 40.9% of the import bill.

Imports of capital goods increased by 22.6% to $3.73 billion, making up 28% of the total. On the other hand, imports of consumer goods declined by 4.9% to $2.37 billion, making up 17.7% of May imports.

Chinabank Research said the import growth in May was driven by the strong demand for capital goods, rather than global oil prices.

“If this trend persists, an increase in imports could be viewed as a positive development, as it portends improving business sentiment, stronger productive capacity, and support for future economic growth,” Chinabank Research said in a note.

By commodity group, electronic products posted the largest import value at $4.63 billion, surging 93.3% from the $2.39-billion value recorded in May 2025. Electronic goods accounted for 34.7% of May imports.

Imports of semiconductors, which accounted for 28.1% of imported electronic goods, rose by 125.8% to $3.75 billion in May.

Imports of mineral fuels, lubricants and related materials, which accounted for 13.1% of May imports, jumped by 35.6% to $1.75 billion.

China was the country’s top source of imported goods with $4.23 billion or 31.7% of the total import bill in May.

South Korea followed with $1.76 billion (13.2%), Indonesia with $858.79 million (6.4%), Malaysia with $813.09 million (6.1%), and Japan with $806.32 million (6%).

AI BOOM
In May, exports of electronic products jumped by 11.9% to $4.3 billion, making up 54.6% of the total exports.

Semiconductors, which accounted for the bulk of electronic products and more than 40% of total exports, rose by 11.5% to $3.21 billion.

“The AI (artificial intelligence)boom continues to support demand for Philippine semiconductors,” Chinabank Research said.

“However, logistical constraints emerged, with reported shipment delays at the Ninoy Aquino International Airport due to congestion and limited warehousing capacity — highlighting infrastructure bottlenecks that could pose near-term risks,” it added, noting that local chipmakers rely on air freight to import components for assembly, testing, and packaging before re-exporting them.

Exports of mineral products, which accounted for 5.2% of the total, climbed by 30.2% to $406.78 million in May.

The United States was the main destination of locally made goods in May with $1.35 billion in exports or 17.2% of the total.

It was followed by Hong Kong with $1.2 billion (15.2% share), Japan with $1.03 billion (13.1%), China with $905.2 million (11.5%), and Singapore with $442.55 million (5.6%).

OUTLOOK
The Philippines’ ongoing talks to revise the Japan-Philippines Economic Partnership Agreement, as well as its upcoming free trade agreement with Canada, could provide opportunities for export growth in the coming months, Chinabank said.

However, the US’ uncertain trade policies pose risks to the country’s trade deficit, it noted.

“Proposed US trade measures — including new tariffs of up to 12.5% due to forced labor concerns and 100% tariff on imports from countries imposing digital service taxes — pose potential downside risks, although implementation remains uncertain,” Chinabank said.

Philippine exports could face tariffs of up to 12.5% after it was flagged by the US Trade Representative in June for allegedly failing to prohibit the importation of goods made with forced labor.

US President Donald J. Trump last week threatened to slap a 100% tariff on goods from any country that imposes a digital service tax on American companies.

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said export growth might lose momentum in the coming months amid softening demand.

“Momentum continues to fade… due in large part to the intensifying drag imposed by softening demand from Hong Kong and the US, while support from other key markets has also vanished,” he said in an e-mail.