Fears abound as Philippine exports plummet 15.1% in August

Exports contracted by 15.1% YoY in August, with electronics as the largest drag (-30.6%). Sequentially, exports fell by 8.5% MoM. Traditionally, exports tend to do better in the second half of the year as seasonal effects kick in. However, as reflected by the weak figures, the positive cyclical impact has yet to materialize (we are hopeful that it will in the coming few months). We have already penciled in an anemic 1.5% growth in export numbers for the year. But if the numbers fail to improve sequentially in the coming months, it is conceivable that export growth could turn negative.

Moreover base effects are going to be unfavorable in the coming months and September's export growth growth (YoY terms) is likely to fare as bad or even worse. Overall, this spells bad news for the Philippine economy and we see downside risks to our 4.8% GDP growth forecast for the year. Policy makers have understandably been focused on stimulating domestic demand. As such, rate hikes are off the cards for the rest of the year. All eyes will also be on the stimulus package that is scheduled to be formally announced today.