MANILA - After posting its lowest annual contraction since October 2008, Philippine merchandise imports slipped by more than 30% in July.

Data from the National Statistics Office showed that the country's imports fell 31.6% to $4.026 billion from the $5.882 billion recorded in the same month last year. Compared to June's imports of $4.106 billion, the latest figure is lower by 2%.

In June, the country's imports fell by 22.8%, the lowest annual drop since October last year. Since November 2008, imports have been declining at a range of 30% to 38%.

Purchases of electronics parts, a key component in the country's export sector, dropped 8.2% to $1.601 billion from the $1.745 billion recorded in the same month last year. This was mainly caused by a 7.2% decrease in semiconductor imports, which took the biggest share of electronic products at 30.6%.

Other key imports included mineral fuels, lubricants, transport equipment, industrial machinery and equipment, and organic and inorganic chemicals.

Japan remained the country's largest source of imports in July with a 13.5% share, recording payments worth $544.45 million. This was, however, an 11.2% decline from the same month last year.

The United States came in second with $472.31 million or 11.7% of total imports, followed by China ($353.64 million), Singapore ($324.29 million), and Taiwan ($302.45 million).

The government is expecting imports to fall between 8% and 12% this year, better than an earlier estimate of a 12% to 14% contraction. Exports, on the other hand, are seen to drop between 13% and 15%.

However, the Bangko Sentral ng Pilipinas (BSP) said these targets are unlikely to be reached, given the sharp decreases in exports and imports over the past months.

"We have to revise the assumption to take into account weaker than anticipated performance of our trading partners," BSP Deputy Governor Diwa Guinigundo said in a congressional hearing on the proposed 2010 budget early this month.

Customs

Expectations for imports from January up to August data are not rosy.

According to the Bureau of Customs, it collected only P147.2 billion in the first 8 months of the year--P28.23 billion lower than its target of P175.43 billion and P20.26 billion lower than the P167.46 billion it collected in the same months last year.

Low revenue from customs has been partly attributed to for the bulging budget deficit, which reached P210 in the January to August period. This figure is just P40 billion shy of the current P250 billion full-year target of the government, prompting economists and analysts to revise their projections upward.

High budget deficit tends to result in more national debts, which in turn squeezes the budget allocated for much-needed social services.