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Weak export data is weighing on Asia’s growth prospects for the rest of this year and beyond. Geopolitical troubles, sharp interest rate hikes, and a faltering Chinese economy took a toll on global trade, impacting especially the export-oriented ASEAN economies.
With a 10.4% year-on-year plunge in October and a 16.2% year-on-year drop in September, Indonesia saw the biggest slip in exports recently. Lower global prices for coal, nickel, and palm oil weighed on the nation’s export performance. Following this trend, the nation’s Finance Ministery slightly downgraded the gross domestic product (GDP) outlook for 2023 to 5.04%, from the previous 5.1% forecast.
Meanwhile, the Philippines’ total exports in September 2023 decreased 6.3% to $6.73 bn, due to a decline in exports of electronic products, manufactured goods, and other mineral products. The International Monetary Fund (IMF) slashed its 2023 growth forecast for the Philippines to 5.3% from its previous estimate of 6.2%. The organization cited a sudden global slowdown impacting goods and services exports as one of the main reasons.
In Thailand, exports of goods declined 3.1% in the July-September quarter. The National Economic and Social Development Plan (NESDC) expects the Thai economy to grow 2.5% this year, the lower end of a previous forecast range of 2.5% to 3.0%, and slightly lower than the 2.6% expansion in 2022. The NESDC also predicted a 2% contraction in exports for 2023. However, for 2024, it expects exports to rise 3.8%.
Thailand has been grappling with slow exports for the past few quarters but trying to offset it with tourism growth. However, as per McKinsey weak exports and slower investment have undercut tourism recovery. “Slackening global growth has stymied the economy”, says the consulting firm and attributs Thailand’s decline in exports mainly to the economic slowdown in China, its largest trading partner.
Singapore is also struggling with a continuing decline in exports. The city state’s exports slipped for a 13th consecutive month in October on a year-on-year basis due to global headwinds and dwindling demand. The nation’s non-oil domestic exports declined 3.4% in October from the same month a year earlier, dragged down by electronic as well as non-electronic exports to its key markets. The largest decline was witnessed in non-oil shipments to Taiwan, which contracted 43.7% year on year.
According to the Monetary Authority of Singapore’s survey, economists lowered its 2023 growth estimate for the nation to 1% due to a “weak” external demand outlook.
Malaysia also has to grapple with a low demand, mainly for petroleum and electrical and electronic (E&E) products. Exports in the country dropped 4.4% year on year to 126.19 bn ringgit ($27 bn) in October. As per the Ministry of Investment, Trade, and Industry (MITI) exports of manufactured goods slipped by 3.5% year on year. Manufactured goods constituted over 80% of total exports. HSBC forecasts as prolonged trade downturn and therfore cut its growth estimate for Malaysia to 4.5% from 4.7% for 2024.
However, Vietnam was an exception as its exports in October climbed 5.9% from a year earlier to $32.31 bn, led by a spurt in agricultural exports. In terms of outlook, Vietnam Textile and Apparel Association expects the nation’s textile and apparel exports to exceed $40 bn in 2023. HSBC is optimistic about continued export growth in Vietnam due to government support. IMF also maintained its GDP growth target for Vietnam at 4.7% for 2023 and 5.8% for 2024.
Weak global trade pressurises Asia’s economic outlook
Exports are largely dependent on global trade and the World Trade Organisation (WTO) has slashed its global exports growth estimate due to a slowdown in global manufacturing. It now predicts the world trade volumes to reach 0.8% this year, down from a forecast of 1.7% growth in April.
“Falling energy prices and the end of Chinese pandemic restrictions raised hopes of a quick rebound. So far, these hopes have not materialised, as strained property markets have prevented a stronger recovery from taking root in China and as inflation has remained sticky in the United States and the EU,” says the WTO. “Together with the after-effects of the war in Ukraine and the Covid-19 pandemic, these developments have cast a shadow over the outlook for trade in 2023 and 2024.”
Declining export numbers not only dent confidence but also weigh on the overall economic outlook of Asia, especially ASEAN. Given the weak global demand, the region’s exports remain under pressure.
However, HSBC sees few signs of an electronics upturn. Also, the WTO foresees global trade growth to pick up to 3.3% next year, but nevertheless lowered its 2024 growth forecast for overall Asia from 4.3% to 4%.
The Asian Development Bank revised its growth forecast for Southeast Asia down to 4.6% in 2023 and 4.8% in 2024. It stated, “Weaker external conditions and demand for the region’s manufactured and commodity exports are the main reasons behind the slower growth.”
