Philippines' December exports contracted for the ninth consecutive time on year-on-year basis. Weakness in exports of textiles, food and furniture mainly led to the overall decline in exports. The country's shipments to Asean nations and China continued to be weak. Meanwhile, Philippines' import growth has rebounded in recent months, mainly due to capital imports.

However, this has put pressure on the trade deficit that has been widening in spite of lower oil prices. But, given the declining external debt, structural surplus in the current account and huge foreign reserves, the widening of trade deficit should be looked at as healthy, rather than as vulnerability for the economy.

"We continue to expect lower oil prices to sustain a current account surplus and see the Philippines external balance improving to 4.4% of GDP in 2016 from 3.7% of GDP in 2015", says Barclays.

The Philippines' exports declined 3% y/y in December. The fall was registered in spite of a low base. The weakness continues to be around non-electronic shipments that declined 12.1% in the month, whereas electronics shipments expanded decently, rising 6.2% y/y. In 2015, Philippines' exports dropped a cumulative 5.6%.

The Philippines' central bank looks comfortable with its policy stance and biased towards maintaining stability in PHP. If growth in remittances slows down, the BSP is expected to be comfortable with certain weakness in the PHP. The central bank's next policy move is likely to raise interest rates; however, the first rate hike is expected to happen only in Q2 2017.