Russia-Ukraine war to drag on Philippine export

MANILA, Philippines — The continued tension between Ukraine and Russia will likely put a dent on Philippine exports as well as in many other Asia-Pacific economies.

In its weekly economic preview, New York-based market intelligence firm S&P Global said the region has so far been resilient to global economic shockwaves because of the war.

This is because direct trade exposure of many Asia-Pacific economies to Russia and Ukraine is relatively low.

But Rajiv Biswas, S&P Global Market Intelligence chief economist for Asia-Pacific, warned that the negative economic impact of the war on economic growth in Europe this year would be a drag on exports of Asia-Pacific countries to the region.

“Due to the importance of Europe as a key export market for many Asia-Pacific economies, a significant slowdown in Europe’s economic growth would be a key vulnerability for exports,” Biswas said.

Of the top 10 export destinations for the Philippines, only two economies – the Netherlands and Germany – are in Europe.

Latest trade data showed that as of February, exports to the Netherlands still jumped 70 percent, but slipped five percent to Germany.

Exports to France and Switzerland, which belong to the top 20 destinations for Philippine products, also improved 40 percent and 10 percent, respectively.

However, the data have yet to fully show the impact of the war on exports as the conflict started only in February.

Apart from exports, Biswas noted that a key transmission channel is through higher world prices for a wide range of mineral and agricultural commodities due to global disruptions.

On this part, the Philippines already felt the impact of high prices especially after inflation soared to a six-month high of four percent in March.

“This is driving up inflation pressures as well as import bills for many Asia-Pacific nations reliant on commodity imports, notably due to surging oil, liquefied natural gas, and coal prices,” Biswas said.

The country’s total fuel imports in February more than doubled to $1.67 billion from just $721 million a year ago. The fuel import bill is expected to be bloated over the next few months as global oil prices remain elevated.

“While the region has been relatively resilient to the initial shocks, the duration and potential further escalation of the war create considerable uncertainties for the near-term outlook,” Biswas said.

Still, Biswas emphasized that leading economic indicators continue to show that many economies have so far remained resilient to the Russia-Ukraine war.

One of these is the latest purchasing managers’ index (PMI), indicating that business conditions for output and new orders have been driven by other key factors, notably changes in domestic COVID-19 restrictions.

The Philippines’ PMI hit a three-year high in March, rising to 53.2 from the 52.8 in February.

“While the base case scenario is for continued resilient growth in the region, there are still considerable downside risks to the global and regional outlook from the war and potential for further dangerous escalation of the geopolitical confrontation between military powers in Europe,” Biswas said.