Despite a contraction in total cotton production area, Philippine cotton lint output for CY 2005/06 is projected to increase marginally.
The Philippines produces only about 3 percent of its total cotton requirements and relies mostly on imports. Cotton lint demand is projected to decline in CY 2005/06 in part due to weak economy, unregulated entry of smuggled low-priced garments and abolition of textile quotas last year.
Imports are seen to decline as a result of weak cotton demand. The Value Added Tax (VAT) Reform Law passed last year, lifted VAT exemptions for cotton and cotton seeds, all cotton imports are now subject to VAT of 12 percent.
Production
Philippine cotton lint output for CY 2005/06 is projected to increase to 2,042 MT due to improved yields of the adopted hybrid cotton varieties, despite a contraction in total cotton production area.
Projected production area declined in CY 2005/06 from 4,921 hectares to 3,681 hectares. Currently, the Philippines only produces about 3 percent of its total cotton requirements and relies mostly on import for majority of its cotton demands.
Consumption
The GRP recently announced that GDP grew 5.1 percent in 2005, slower than it's projected target of 5.3 to 6.3 percent. The slower growth has been attributed to weaker farm output and slow export demand.
Philippine GNP, however, rose by 5.7 percent last year, buoyed by remittances from overseas workers, although still lower than the 6.2 percent GNP growth in 2004. Surprisingly, the significant increase in overseas remittances (which have fueled personal consumption in recent years) did not boost personal consumption to expected levels.
Trade
With no substantial increases in domestic cotton production seen in the near future, the Philippines is expected to remain reliant on cotton lint imports.
In CY 2004/05, the Philippines imported about $40 million worth of cotton, or over 95 percent of its domestic cotton requirements. The United States supplied over 65 percent of Philippine imports.
United States Department of Agriculture
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