Philippine exports to lag in ASEAN

by Louise Maureen Simeon (The Philippine Star), 1 Jun 2021

MANILA, Philippines — While exports are expected to post a huge turnaround this year, the Philippines is seen lagging behind the other ASEAN-6 economies as COVID-19 cases continue to impact external trade, an international think tank said.

In its latest research brief, UK-based Oxford Economics said the Philippines remains a laggard in the ASEAN-6 economies which include Indonesia, Malaysia, Singapore, Thailand and Vietnam, even as exports are likely to rebound from a dismal 2020 performance.

Exports are expected to positively contribute to all six economies, but the Philippines will post the lowest improvement, it said.

The Philippines is also projected to have the smallest contribution of 2.7 percentage points in terms of share of total exports to the country’s gross domestic product (GDP).

This compares to Singapore’s over 15 percentage points, Vietnam and Malaysia’s more than 10 percentage points, and Thailand’s six percentage points. Indonesia is just slightly above the Philippines at three percentage points.

“We forecast a relatively muted contribution in Indonesia and the Philippines, broadly in line with their recent exports volume performance,” Oxford economist Sung Eun Jung said.

The country’s exports in March jumped 31.6 percent to $6.68 billion largely due to a low base effect from last year’s lockdown measures.

“Though exports have now exceeded pre-pandemic levels for all ASEAN-6 economies, their performance has varied. Vietnam and Malaysia have outperformed, while the Philippines has fared much worse,” Jung said.

In seasonally adjusted terms, export volumes were up 25.5 percent in Vietnam and 17 percent in Malaysia from pre-pandemic levels. In comparison, Philippine exports were only better at a measly 0.5 percent.

Nonetheless, Jung emphasized that the strong demand from the ASEAN-6’s two major trading partners, the US and China, would continue to benefit exports while a rise in global prices would also help commodity exporters.

This as global trade is off to a massive recovery which would be advantageous for the region. Oxford estimates that exports will boost ASEAN-6 GDP growth by 6.6 percentage points this year after shaving off 4.9 percentage points in 2020.

However, Jung warned that gains might be offset for those countries where mobility restrictions have recently been re-imposed like the Philippines following the surge in COVID-19 cases.

“Gains won’t be equally shared among the economies due to differences in the composition of their exports, trading partners, and manufacturing competitiveness,” Jung said.

Oxford’s outlook for the ASEAN-6 economies is also in line with its assessment of their manufacturing competitiveness. It ranked Vietnam and Malaysia as the most attractive destinations for export-oriented foreign direct investment in Asia.

Unfortunately, it found the Philippines to be less attractive, despite low wages and young labor forces, due to weak infrastructure and business conditions.

“Plugging into global supply chains, especially as firms adjust to rising costs in China, will have a significant impact on the manufacturing production of ASEAN-6. Those that lose out in this competition will likely suffer long-term hits to both exports and growth,” Jung said.

Still, Jung added that manufacturing should be less affected by the latest restrictions than last year, given that measures are more targeted.

Further, agricultural exports will continue to be a stable source of income for many ASEAN economies as they were last year.

Jung maintained that the same cannot be said for the Philippines, where the production of bananas, which account for nearly 40 percent of agricultural exports, suffered heavily from Panama disease and typhoons.