April trade deficit nears 4-year high

THE COUNTRY’S goods trade deficit widened to its largest gap in nearly four years in April, driven by the Middle East conflict spillovers and weaker peso that made imports expensive.

Preliminary data from the Philippine Statistics Authority (PSA) showed the country’s trade-in-goods deficit reached $5.97 billion in April, widening by almost half from the $3.98-billion gap in April last year. The gap also rose from the $5.03-billion deficit in March.

It was the largest trade deficit in almost four years or since the revised $5.99-billion gap in August 2022.

The country’s trade balance has been in deficit for more than a decade or since the $64.95-million surplus recorded in May 2015.

In a research note, Chinabank Research (Chinabank) said that the country’s trade performance “continued to reflect spillovers from the Middle East conflict, with elevated oil prices inflating the import bill, disrupting supply chains, and weighing on consumer sentiment.”

However, Chinabank noted that a potential easing in US–Iran tensions, which could likely to lower oil prices, along with weak domestic demand curbing imports, could narrow the trade gap later this year.

In April, US President Donald J. Trump began the month saying that his military forces will leave Iran “pretty quickly,” as he discussed the timeline for the conflict’s end, Reuters reported.

Two weeks into April, Iran ramped up control over the Strait of Hormuz — reverting its position to reopen the trade-concentrated waterway just a day earlier — citing the US blockade of imports as a violation of the ceasefire.

Mr. Trump closed the month “unhappy” with the latest negotiation development that month, as the Tehran-sent proposal did not delve into its nuclear program, the US president’s primary point of concern.

Cid L. Terosa, senior economist at the University of Asia and the Pacific, said that the import surge reflects a weaker peso which raised import costs.

“The weakening of the peso made imports expensive, undermining any increase in exports due to cheaper prices,” he said in an e-mail.

In April, the peso logged its worst finish that month at P61.567 against the dollar on April 29. The following day it touched the record weakest intraday low of P61.75. To date, the local currency’s record weakest close was at P61.75 per dollar on May 19.

Merchandise imports climbed by 22.4% year on year in April to $13.17 billion, a turnaround from the 2.4% drop in the same month last year. It was also faster than the 17% expansion in March.

April marked its third straight month of growth. It was the largest imports expansion in nearly four years or since the 26.4% surge recorded in August 2022.

On the other hand, total outbound sales of Philippine-made goods grew by 6.3% year on year in April to $7.21 billion, slower than the 7.6% increase in April 2025 and the 20.8% expansion a month earlier.

The value of export sales in April was the lowest in three months or since the $7.14 billion in January.

April saw the weakest export growth in eight months or since the 5.5% gain in August 2025.

In the January to April period, the trade-in-goods deficit widened to $19.28 billion from the $16.44-billion gap in the same period last year.

Exports expanded by 11.2% to $29.93 billion in the first four months of 2026, while imports jumped by 13.5% to $49.22 billion.

That month, the country surpassed the 2% growth targets for both imports and exports set by the Development Budget Coordination Committee (DBCC) this year.

For Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, the outperformance of import growth over exports has been driven by higher commodity prices, particularly imports of commodities, minerals and fuels, as well as raw materials and intermediate goods.

“The concerning thing is that this is masking quite a big deterioration in ‘real’ import demand, with capital and consumer goods import growth weakening further last month,” he said in an e-mail.

PSA data showed that imports of raw materials and intermediate goods for that month jumped by 31.1% to $5.03 billion. These accounted for 38.2% of the country’s total imports in April.

Capital goods grew by 8.2% to $3.68 billion and accounted for 27.9% of the country’s total import bill.

Imports of mineral fuels, lubricants and related materials jumped by 105.6% year on year to $2.55 billion.

Mr. Terosa said that mineral fuel import significantly contributed to the import bill that month as “the Middle East crisis raised their prices as demand for them surged amidst limited supply.”

Meanwhile, the imports of consumer goods declined by 16.7% to $1.88 billion in April, in which Chinabank said elevated fuel costs tightened household spending, especially for non-essentials.

“With consumption — the main engine of economic growth — still weak, we could continue to see soft GDP (gross domestic product) print for this quarter,” Chinabank said.

In April, China was the top source of imported goods with a 29.7% share worth $3.92 billion. It was followed by South Korea with $1.55 billion (11.8% share) and Japan with $4.03 billion (7.3% share).

Electronic products, which cornered 47.7% of the total exports, grew by 1.2% year on year to $3.44 billion in April.

Semiconductors, which accounted for the bulk of electronic products and 33.8% of the total exports, declined by 4.7% year on year to $2.43 billion.

“Semiconductor exports, the country’s largest segment, contracted after 11 months of strong growth, likely manifesting the impact of previous reports of order cancelations due to air cargo disruptions caused by elevated jet fuel prices,” Chinabank said.

It added that decline likely reflected supply chain disruptions for specialty gases and petrochemical inputs, which have slowed production.

The United States was the main destination of locally made goods in April as exports to the country amounted to $1.30 billion, accounting for 18% share of the total outbound goods.

It was followed by China with $926.66 million (12.9% share), Japan with $914.64 million (12.7% share), Hong Kong with $914.59 million (12.7% share) and Singapore with $332.75 million (4.6% share).

For Mr. Chanco, ease in export growth may be attributed to the unwinding favorable base effects as exports have been losing momentum caused mainly by demand from Hong Kong weakening quite substantially albeit from what was a relatively strong start to the year.

OUTLOOK
Sergio Ortiz-Luis, Jr., president of Philippine Exporters Confederation, Inc., said that the country’s trade performance may remain within manageable levels barring any shocks and sudden disruptions in the Middle East conflict.

For Mr. Terosa, the remaining months of the second quarter will be the most challenging for the country’s trade performance as high oil prices, inflating food imports, and rate hikes loom.

He added that for the second half of the year, the country’s trade performance will depend on the developments surrounding the Middle East crisis.

“If the crisis ends or is tamed, the second semester could be a pivot point. If the crisis continues, the second semester will witness a more urgent defensive posture for trade,” Mr. Terosa said.

He cautioned that meeting the DBCC’s 2% growth targets for imports and exports in 2026 may be difficult if the conflict rages on.

“The government can de-risk imports by diversifying sources of oil and petroleum products and set up import financing or foreign exchange risk programs for major exports and imports,” he said.

He also noted that the country may take advantage of global product trends in electronic vehicles and batteries by empowering mineral exports.

For Mr. Chanco, import growth will likely continue running faster than exports due to the lift from commodity prices, which may exert more downward pressure on the peso.

He said that exports, on the other hand, have lost some momentum lately and leading indicators are deteriorating.

“This suggests to us that this quarter and next, at the very least, will be very challenging, given the indirect impact of the war on global trade,” he added. — Matthew Miguel L. Castillo