Australia
China
India
Indonesia
Japan
Malaysia
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
The upcoming holiday season around the globe generally keeps factories running at full pace this time of the year but a sluggish global demand has proven a challenge in 2022. Asia export figures are languishing as high inflation and interest rates have tapered the demand from the US and Europe.
Additionally, factory output in Asia mostly weakened during the month of September as slowing demand from China and western economies hit new orders. Barring a few countries, the majority of Asian economies are seeing a decline in export numbers.
“Non-China Asian exports are still growing, but the pace of increase has slowed and will slow still further as key export destinations struggle with inflation, energy security, and rising recession risks,” ING said in a note last month. Meanwhile, the World Trade Organization (WTO) expects Asia’s export growth to decelerate to 1.1% in 2023 from a projected 2.9% expansion this year.
Asia’s trade sector becoming a drag?
China, the world’s factory, delayed the release of September trade data in a rare event. However, market experts were anticipating further softening in export figures weighed down by a weakening global demand. A Reuters poll estimates that outbound shipments from China likely rose 4.1% in September after growing 7.1% in August.
The export growth in August was lower than the 18% expansion seen in July, as per customs data. Global demand is weakening as the US Federal Reserve as well as central banks in Europe and broader Asia have been on a spree of interest rate hikes. Additionally, repeated closures of Chinese cities have affected production.
The zero-Covid policy in China is expected to continue, as indicated by President Xi Jinping during his address to the 20th China Communist Party Congress. On the other hand, China’s exports have also come under pressure due to tariffs imposed by the United States. The Biden administration recently banned the export of technology and tools used for manufacturing high-end chips to China.
Neighbouring country India is also seeing a decline in export figures, with merchandise exports growing at the slowest pace in 19 months. The country’s merchandise exports grew by 4.82% in September to touch an eight-month low of $35.45 bn. India’s trade deficit widened in September. While slowing global demand has had a significant impact, India has also placed export restrictions on wheat, steel, iron and petroleum products, which contributed to the weak export growth.
In trade-heavy Japan, export growth slowed to 13% in September compared to 26.2% in August, data from the Ministry of Finance showed. Japan was banking on the weak yen providing a boost to exports but a weak demand from the US and Europe has caused trouble. Car exports from Japan were the worst hit, falling 40.3% in September, the first decline in seven months. Meanwhile, the current account surplus has shrunk to a record low as energy imports become costlier.
Export-reliant economy South Korea saw a similar trend, as September exports grew at the slowest pace in nearly two years. Outbound shipments from South Korea grew by 2.8% in September, compared to 6.6% in August. The country’s trade deficit hit a record in August, but shrunk in September, marking a sixth consecutive month in the red. High commodity prices, expensive fuel and a weakening won have hit the country’s trade balance.
Taiwan’s exports fell 5.3% in September, the first time in two years as demand from China weakened even as demand for chips was stable. China is Taiwan’s largest trading partner, and exports to the neighbouring country fell by 13.3% in September, after contracting by 9.9% in August.
“Asia’s trade sector is more likely to become a drag on economies in the region over the coming quarters,” said ING.
In Southeast Asia, Vietnam saw a sharp weakening in export growth. September saw the second lowest export figures in 2022, shrinking to $29.9 bn compared to $34.9 bn in August.
Indonesia, Malaysia bucking the trend
While overall Asia export figures are declining, there are some economies that are bucking the trend and riding high on upbeat export data, albeit still seeing muted growth in September.
Indonesia’s September trade surplus was $4.99 bn, with exports rising 20.28% compared to 30.15% in August. Indonesia exports coal, palm oil, tin and other commodities, and has been benefitting from the steep prices in global markets. However, commodity prices have now started to ease, and Indonesia’s trade surplus may shrink in the next few quarters.
Neighbouring country Malaysia saw a similar trend, as exports grew 30.1% in the month of September, slower than the August export growth of 48.2%. However, Malaysia’s trade surplus hit a record high in September at 31.71 bn ringgit ($6.72 bn), up 20.9% over the previous year.
“Indonesia is still riding the commodity boom, although challenges may start to build over the coming year, amid rising prices locally and a sliding current account position externally. Like in Malaysia, growth may start to pull back as the export boom fizzles, even if less so than elsewhere,” said Frederic Neumann, Chief Asia Economist, HSBC.
