Manila, August 5, 2003 By Rica D. Delfinado (STAR) Merchandise exports ended two months of contraction, posting a higher-than-expected 4.2-percent improvement in June to $3.06 billion despite a slowdown in demand for key electronic products, the National Statistics Office (NSO) reported yesterday.

Analysts, however, said that while exports have picked up and look set for sustained growth, the failed coup attempt against President Arroyo and fresh concerns over political stability are casting a shadow over the country’s economic prospects.

The government statistics office said total exports for the first six months of 2003 grew by 2.1 percent to $17.06 billion from $16.71 billion a year ago.

Shipments of electronic products, including semiconductors and data processing machines, tumbled by 5.2 percent to $1.930 billion in June from $2.036 billion a year ago.

The government statistics office said the drop in overall demand for electronics was due to the 5.6 percent decline in shipments of component/devices which account for 45 percent of total electronic product shipments.

Electronics accounted for around 63 percent of total export revenue in June.

Other key exports such as apparel and clothing accessories and petroleum products managed to post notable gains in June.

In particular, shipments of articles of apparel and clothing accessories rose by nearly 10 percent to $237.66 million from $216.80 million a year ago.

Petroleum products, which ranked third with June exports total revenue of $59.61 million surged by 241.2 percent from only $17.47 million in the same period last year.

Analysts said while further export growth is expected, there could be a temporary drop this month in the aftermath of a failed military mutiny on July 27 which dampened investor confidence and brought financial markets tumbling.

"We could see some problems in August. Exporters are worried about the impact of the state of rebellion (order)," said Victor Abolla, an economist at the University of Asia and the Pacific (UAP).

At the same time, he remained optimistic that the government’s full-year export growth target of 5-8 percent is still within reach.

IDEAglobal.com analyst Julian Wee said he expected "a slow and steady recovery for exports, depending on the rebound of the US economy," noting that weak investor confidence would primarily affect investments and not trade.

Trade and Industry Secretary Manuel Roxas II warned the persistent power grab rumors by the military and endless political bickering could severely affect the country’s economic prospects.

"Let us not squander the opportunity before us," Roxas said, adding that if the uncertainty continues, foreign buyers will be a concern about supply continuity and this could prompt them to scout for alternative sources.

To perk up the export markets, Roxas said the government has intensified marketing and promotional efforts in traditional markets as well as in new and emerging markets.

"Our gains are in markets less dependent on the US. Exports continue to be soft in markets that re-export our products to the US. But shipments to economies that buy our products for their own consumption continue to grow while non-traditional products are steadily gaining shares in our overall export pie," Roxas said.

Exports to the US, the country’s biggest market, are down by six percent in the first semester, but shipments to the Netherlands, the gateway to the European markets, are up 47 percent and to Hong Kong, the gateway to China, by 59 percent.

Meanwhile, non-traditional products that registered strong growth rates during the first semester were food products which posted a 17 percent growth; marine products, 14 percent; garments, nine percent; wearables, five percent; organic products, five percent; and construction materials, two percent.

The increase in garments, the country’s second biggest export product line, was attributed to the shifting by major markets of their supply base in Asia, Africa and Latin America. Other product lines that showed strong export growth in June were motor parts as well as giftware and holiday decors. – with Rocel Felix, AFP

Reported by: Sol Jose Vanzi

All rights reserved