• Philippines’ export growth rebounded to 3% in November from -2.2% in October, the fastest pace in 10 months
• Philippines industrial production however recorded a decline of -13.8% yoy in November from -12.3% previous month
• In Indonesia, retail sales declined by -16.3% yoy in November, from -14.9% in October

Orders for E&E products and demand from China will support exports

Philippines’ export growth rebounded to 3% in November from -2.2% in October, the fastest pace in 10 months, due to exports of electronics products, which accounted for 60.9% of total export. Imports, however, contracted further to 18.9% yoy in November from -18.8% in October, declining at double digit growth for 10 straight months dampened by weak consumer demand. This was reflected in decline of imports of capital goods, which contracted by -15.8% yoy in November. With the decline in imports relative to exports, the country’s trade deficit narrowed to US$1.73bn in November, compared to previous month of US$1.79bn. In the months ahead, we believe that the sustained improvement in the region’s manufacturing sector and sustained recovery in China’s economy, as well as steady sales of global semiconductors, Philippines exports will likely continue show further improvement, but unlikely to be strong. In 3Q20, Philippines’ economy contracted by 11.5% yoy, a smaller contraction when compared to -16.9% in 2Q20. Back in 11 Sept 2020, the Government approved a stimulus package worth PHP165bn to further support the country’s economic recovery. The government also anticipate the recovery on economic activity and exports on the passing of reforms of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. In tandem with the manufacturing PMI in November, the Philippines industrial production (IPI) recorded a further decline of -13.8% yoy in November from -12.3% previous month. This was the steepest pace since August and ninth month decrease in manufacturing output due to Covid-19. The downtrend was influenced by the lower production of machinery and petroleum products. However, with exports showing some signs of improvement, the manufacturing sector will likely show some recovery after the relaxation of ongoing pandemic restrictions.

Separately, in Indonesia, retail sales declined sharply by -16.3% yoy in November, from -14.9% in October, which has remained in contraction for the twelfth consecutive month. The decline in November was due to lower sales of food, drinks and tobacco of -6.6% yoy (-5.6% in October) as well as declines in clothing (-56.6% yoy), fuels (-14.3%) and cultural and recreational goods (-40.3%). Despite weak retail sales, according to Bank Indonesia’s consumer confidence survey, the index in December increased to 96.5 second month increase in a row (from 92 in November) due to expectations of Covid-19 vaccine and enhanced perception of current economic condition. Although below 100 expansion mark, this was the strongest reading since March 2020, where all categories of expenditures and education show improvement. Furthermore, with the beginning of vaccination of the people which begins this week, the survey also noted that consumer expectations of economic conditions remained optimistic led by better expectations of income and job availability.

Source: Affin Hwang Research - 15 Jan 2021