The Philippines' exports figures for May registered a strong +18.7% mom (-0.8% yoy), suggesting that the exports cycle has bottomed out, according to the Royal Bank of Scotland.
The increase marks the third straight month of sequential expansion and is attributable primarily to higher shipments of electronics. The improvement has coincided with that in US demand for electronics – the US semiconductor equipment book to bill ratio has been holding above one since January this year. Electronics exports from the Philippines increased 6.2% mom (-9.3% yoy) in May.
The RBS notes that exports performance may be stronger than what the headline numbers suggest. Nearly 8% of overall May exports are increases in transport equipment and petroleum product exports, which may not be sustainable long-term. Such one-off orders were also present in May 2012. It is these orders that have seen a substantial decline of 7.1% yoy. Adjusting for these, exports have grown 6.1% yoy.
Exports for most major categories and to most major destinations have strengthened in May. Agriculture and wood products exports registered increases showing that the government's increased focus on these areas is paying off.
"Today's exports print does not carry any policy implications for the Philippines, which has depreciated 3.6% in NEER terms since April. This has taken the pressure off the BSP to try to contain the peso's appreciation. We expect the central bank to hold both the policy and the Special Deposit Account (SDA) rate at its upcoming meeting. We are also leaving our GDP growth forecasts unchanged as we expect a concurrent increase in imports on the back of strong domestic demand," says the RBS.