Philippine imports jumped nearly 28 percent in January from a year earlier, the biggest leap in over two years, and the country’s dependence on food and energy imports is expected to stretch its trade gap this year and dampen the peso.

Manila clocked up a trade deficit of $756 million in January, compared to a surplus of $83 million in January last year, data showed yesterday. Fuel purchases, accounting for a fifth of imports, more than doubled from January 2007 as prices climbed.

The January shortfall represents 15 percent of last year’s entire trade deficit and economists said the gap would continue to widen this year as a slowdown in the United States, Manila’s main trade partner, hits export demand and the cost of essential imported commodities such as rice, corn and oil keeps rising.

The Philippines is particularly exposed to rising imported commodity prices because it buys in most of its oil and has to import basic foodstuffs to feed its rapidly expanding population.

It is one of the world’s biggest importers of rice. In January, rice imports were 491 percent higher in value than a year before, and there is unlikely to be any let-up as Manila is forced to pay sky-rocketing prices amid tight global supply.

Recently the National Food Authority had to buy rice at $708 per metric ton, up 49 percent from the January price.

The rising import bill has played a part in depressing the peso, turning last year’s star Asian performer — up 19 percent against the dollar in 2007 — into a laggard, down 0.7 percent so far this year.

It was trading at 41.6 against the dollar, weaker than Tuesday’s close at 41.575.

"We are not massively bearish on the peso but, given the massive rally you have had in the last 2-3 years, some degree of correction was going to happen and that is what we are seeing," said Callum Henderson of Standard Chartered, which recently cut its view on the peso to neutral from overweight.

"Where will it stop? Tough to say. Probably somewhere between 42 and 43."

The main stock index finished 0.9 percent higher.

January’s annual rise in imports was the biggest since December 2005, when overseas purchases rose 29 percent. It was fuelled by a rise of nearly 23 percent in imports of electronic products, assembled into finished goods for export.

The recovery in electronics imports, accounting for over 46 percent of the total, signals support for export growth in the short term, but economists said it would not last.

"It is very likely that, with global demand expected to come under further pressure, we should see the electronics-heavy exports sector taking a hit," said Vishnu Varathan, an economist at Forecast Pte.

An expected $15.7 billion in remittances this year from millions of Filipinos working overseas will help shield the domestic economy and the currency from a poor trade performance but the rate of remittance growth is slowing from double-digit peaks. — Reuters