PHILIPPINE exports growth slowed sharply in June from a year earlier, weighed down by sluggish demand for electronics and semiconductors, highlighting external risks to the domestic economy and increasing the chances of another interest rate cut this year.
Exports climbed 4.2 percent in June, far lower than May's 19.7 percent annual rise, as shipments of electronics and semiconductors - the nation's top exports- dropped sharply at 14.6 percent on-year against a 0.7 percent fall in May.
The Philippine economy expanded briskly at a 6.4 percent annual pace in the first quarter, its fastest in a year-and-a-half, but the latest data suggested it could lose momentum in the following quarters due to global headwinds.
"That means that unless we see a huge spurt in government consumption, growth in the second quarter is unlikely to be as good as first quarter," said Santitarn Sathirathai, economist, Credit Suisse in Singapore
"Implications for the policy rate is that we are expecting the BSP (central bank) will cut an additional 25 basis points by October," he said.
The BSP cut interest rates by 25 basis points to a new low of 3.75 percent last month, the third reduction this year, to shield the economy from slower global growth and temper a rising peso that is hurting exports and remittances.
Shipments to Japan, the country's top exports market in June, decreased 24.7 percent after registering an annual gain of 81.5 percent the previous month due to downward adjustment in purchases.
Exports to East Asia, the top export destination by economic bloc, fell 5.4 percent from a year earlier, after a 25.6 percent annual climb in May, and exports to ASEAN member countries saw a 6.4 percent drop in June.
"Overall, June data signals that Philippines has not been able to sidestep weakness in the regional external sector, with the highly-weighted electronic sector weighed down by weak consumer sentiment and a pullback in discretionary purchases by the key advanced countries and China," said Radhika Rao, economist at Forecast Pte in Singapore.
"We maintain our stance that export growth stands to lose momentum into the second half," Rao said.
The Semiconductors and Electronics Industries in the Philippines Inc cut its export growth forecast this year to 5-7 percent from 10-15 percent on slowing external demand. (Reuters)