Significant slowdown in exports seen

MANILA, Philippines — The Philippines is seen posting one of the largest magnitude of weighted export market slowdown this year with the projected slower economic growth in the US and Europe, according to S&P Global Ratings.

In its latest report titled “Asia Pacific in 2023: China Rebound Cannot Offset Western Slowdown,” the debt watcher said the Philippines, India and Singapore would have the largest magnitude of weighted export slowdown.

“These economies’ higher reliance on the US and Europe is reflected in the negative exposure,” S&P chief economist for Asia Louis Kuijs and economist Vishrut Rana said.

The economists pointed out that the significance of the US and Eurozone combined is greater than that of China in some Asia Pacific countries, including the Philippines, Singapore, Vietnam, India, Thailand and Japan.

“China’s economic influence has grown rapidly, but the region still relies considerably on wider global growth,” Kuijs and Rana added.

Based on the net external growth impulse that varies significantly across Asia Pacific, the Philippines has the second largest magnitude of weighted export market slowdown at a little over one percent, next to India’s 1.9 percent.

Japan, Thailand, and Vietnam face export market growth declines of about 90 basis points.

S&P said that the remaining Asia-Pacific economies have more moderate export market growth change this year given their balanced external value-added exposure.

“The net external growth impulse for most Asia-Pacific economies will be negative given we expect a stronger slowdown in the US and Eurozone relative to China’s rebound, and that the US and Europe remain important export destinations,” it said.

The debt watcher sees gross domestic product (GDP) in the US contracting slightly by 0.1 percent this year after expanding by 2.1 percent last year, while that of the United Kingdom shrinking by one percent after growing by 4.3 percent last year.

On the other hand, it expects the GDP expansion in China accelerating to 4.8 percent in 2023 from three percent in 2022.

“Growth will slow in the US and Europe in 2023 while recovering in China, putting Asia-Pacific in the middle of crosswinds,” Kuijs and Rana said.

With global growth rotation underway, the credit rating agency said China’s GDP is picking up as it exits COVID controls, while Western economies are slowing down.

“While the Chinese recovery should dampen the effect of the Western slowdown, the net impact on export demand should generally be negative this year. We expect the deceleration in the US and Europe to exceed the acceleration in China,” S&P said.

The Philippines managed to sustain its strong economic rebound with a GDP growth of 7.6 percent last year, exceeding the 6.5 to 7.5 percent target set by the Cabinet-level Development Budget Coordination Committee (DBCC).

It exited the pandemic-induced recession with a GDP expansion of 5.7 percent in 2021, reversing the 9.6 percent contraction in 2020 when the economy stalled due to strict COVID-19 quarantine and lockdown protocols.

For this year, the Philippine economic growth is seen slowing to a range of six to seven percent due to global economic headwinds.