Johannesburg – The Philippines’ trade deficit increased year-on-year in February as imports rose by double digits while exports slowed, the Philippine Statistics Authority (PSA) reported on Friday.
Analysts say February trade data suggests the recovery remains intact but is vulnerable to external shocks due to rising energy prices from conflicts in the Middle East.
Preliminary data from the PSA showed that the country’s trade balance – the difference between exports and imports – reached $ 3.68-billion-billion in February, 23.1% wider than the gap of 2.99 billion dollars posted last year.
Month-on-month, the trade gap narrowed from the revised $4.27 billion posted in January.
February saw the smallest trade balance in nine months or since the $3.64 billion recorded in May 2025.
Exports rose 12.6% year-over-year in February 2026. It was faster than the 2.1% expansion last year but a change from the 1% decline in January.
The import bill for that month reached $11.01 billion, higher than $9.78 billion in February 2025.
On the other hand, total export sales of goods made in the Philippines rose 8% year-on-year in February to $7.33 billion, slower than the 12.8% expansion in February 2025 and the 8.7% gain a month earlier.
It was the slowest pace of exports in six months or since the 5.5% growth in August 2025.
In the first two months of the year, the trade deficit widened to $7.96 billion, 0.1% higher than the $7.95 billion gap in the January-February period last year.
Exports increased by 8.3% to $14.47 billion in the first two months of 2026, while imports increased by 5.3% to $22.43 billion.
The Development Budget Coordination Committee (DBCC) projects a 6 percent and 5 percent growth in exports and imports, respectively, this year.
FALSE AGAIN
Chinabank Research said in a research note that the rebound in imports due to near-term growth will be largely driven by the effects of oil prices as demand for capital goods increased even before the Middle East conflict escalated.
It added that rising oil prices are likely to increase imports and widen the trade deficit in the near term.
“However, soft demand due to inventory shortages will moderate this increase in procurement prices in the second half of the year,” he said.
Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines said the widening of the trade deficit is due to the double-digit growth in imports, driven by higher purchases of electronic products, capital goods, fuel, and intermediate inputs.
He also added that the imbalance widened the trade gap as the income from exports improved.
“The rapid increase reflects a combination of strong domestic demand, sustained spending, and high global prices, particularly for energy and industrials,” he said by email.
Imports of raw materials and intermediate goods in February fell 13.7% to $3.22 billion. These accounted for 29.3% of the total February import bill.
In February, imports of capital goods increased by 55.5% to $4.15 billion, while imports of consumer goods also jumped by 10.4% to $2.14 billion.
Imports of fossil fuels, lubricants and related products rose 3.8% year-on-year to $1.46 billion.
China was the leading source of imports, accounting for 28.4% of the total or $3.12 billion of the total import bill in February. It was followed by South Korea with a share of 12.5% or $1.37 billion and Japan with 8.5% or $933.36 million.
TRANSMISSION OF SUCH GROWTH
“On the export side, growth has continued to be supported by the electrical sector, which remains the largest contributor to the country, as well as the profit of machinery and gold,” said Mr. Asuncion.
He added that the slight growth in exports is due to underlying effects “as February 2025 has already posted a double-digit expansion, as well as continued softening in global demand for selected non-electronic products.”
In a Chinabank study, even with positive growth of 8%, the conflict in the Middle East could disrupt supply chains.
“Exports are facing difficult conditions due to supply chain disruptions and a possible slowdown in economic activity around the world. This could upset the earlier gains from lower US costs that were expected,” he said.
Electronic products, which make up about three-quarters of manufactured goods and more than half of total exports in February, grew by 20.5% to $4.23 billion.
With a 43.7% share from semiconductors of total sales, it increased by 26.9% to $3.20 billion.
Exports of mineral products also increased by 52.7% to $615.26 million in February, while petroleum products decreased by 34.5% to $16.54 million.
The United States was the main destination for Philippine-made goods in February, accounting for 19.3% or $1.41 billion in exports. The other top export destinations were Hong Kong, which accounted for 16% or $1.17 billion and Japan, which accounted for 13.5% or $986.44 million.
Chinabank Research added that exports to the US—the country’s largest export market—rose 42.9%. The current 10% US global tax, which is lower than similar taxes struck down by the US Supreme Court, could help boost US demand.
“Nevertheless, market diversification was evident as US trade policy remains highly uncertain. Exports to East Asia increased by 14.2% and to the EU by 9.5%,” it said.
THE HIGH STRUGGLE
Chinabank also said that the conflict in the Middle East poses a major risk to the country’s trade this year.
To Mr. Asuncion, if this regional tension in the Middle East continues, the immediate transfer channel will be higher world oil prices, which may increase the value of the peso for fuel and transportation from other countries.
“This could further put pressure on imports and the trade deficit in the near term. Higher fuel costs could increase production and logistics costs, as well as spillovers on exports and borders.”
He added that trade performance in March will depend not only on oil prices but also on global demand for electronics, exchange rate movements, commodity procurement conditions, and seasonal trading patterns.
Additionally, any reduction in shipping disruptions or currency support from remittances and portfolio income may partially offset the impact on foreign trade.
“In the coming months we will see an increase in crude oil imports as crude oil prices rise. Some electricity costs will also rise. We may also see imports of major goods and raw materials fall back as investor sentiment begins to fray,” said Nicholas Antonio T. Mapa, chief economist and market strategist at Metropolitan Bank & Trust Co-mail.
He also added that another development that is being considered is the importation of goods used in electronic sales.
“It is now wrong to suggest that companies are no longer importing production materials for our main electronic equipment. Therefore, we may eventually see exports facing challenges in the coming months.”
GOVERNMENT EFFORTS
Even if the political environment risks remain high, the country can still work towards the DBCC goals of export and import growth through a mix of policy support and structural measures, said Mr. Asuncion.
“On the export side, improving trade, easing constraints, and accelerating investment in manufacturing, electronics, and high-value agricultural products will be important. On the import side, continuing to emphasize productive production, especially capital goods that increase supply capacity, will help support sustainable growth rather than increase the risk of Mr.
“From a policy perspective, government initiatives that can help mitigate the impact of long-term external shocks include energy diversification, targeted fuel support during price increases, strengthening local supply chains, and maintaining macroeconomic stability,” he said.
Mr. Asuncion also said fiscal and monetary consolidation will be important to keep inflation expectations in check while supporting growth and foreign competition. – Lourdes O. Pilar
