MANILA, Philippines — Philippine exports are still vulnerable to the continued tension between Ukraine and Russia, even if direct trade exposure among the countries is limited, an economic research firm said.
In its weekly economic preview, New York-based S&P Global said many Southeast Asian economies have so far been resilient to global economic shock waves because of the war.
This, as direct trade exposure of many economies to Russia and Ukraine is very low as a share of total trade.
Philippine merchandise exports to Russia was just 0.2 percent of the total in 2021.
But Rajiv Biswas, S&P Global Market Intelligence chief economist for Asia Pacific, warned that the global economic transmission effects are increasingly impacting Southeast Asian economies, including the Philippines, as the war has become more protracted.
“The indirect transmission effects from weaker growth in Western Europe are a greater vulnerability for the Philippines export sector,” Biswas said.
Last year, Europe accounted for 10.4 percent of total Philippine exports.
The negative economic impact of the war on economic growth in Europe this year is expected to be a drag on exports of many countries in Southeast Asia and Asia Pacific as a whole.
Of the top 10 export destinations of the Philippines, only two economies —Netherlands and Germany— are from Europe.
Latest trade data showed that as of March, exports to Germany already slipped 10.4 percent while that of Netherlands declined 0.6 percent, showing the initial impact of the war on exports.
On the other hand, France and Switzerland, which belong to the top 20 export destinations, still improved 21 percent and 60 percent, respectively.
While Southeast Asian nations have been relatively resilient to the initial shocks, Biswas said the duration and potential further escalation of the war create considerable uncertainties for the near-term outlook.
“A much greater vulnerability for the region is from the macroeconomic shocks to major economies in Europe from the war, notably through higher energy prices and potential disruption of Russian oil and gas supplies to the region,” Biswas said.
“Due to the importance of Europe as a key export market for many economies, a significant slowdown in its economic growth would be a key vulnerability for Southeast Asian exports,” he said.
Further, Biswas maintained that the recent slowdown in China’s economy due to the return of lockdown as COVID cases increase is creating a double blow to the region’s export sector in the near-term.
Last month, China was the top export destination of the Philippines with $1.18 billion or 16.5 percent of the total exports.