PHILIPPINE merchandise exports face a “difficult recovery” ahead with no end in sight to Sino-US trade tensions that have prompted the World Trade Organization (WTO) to slash its forecast for global trade in goods.
As the WTO on Wednesday cut its forecast on global merchandise trade growth to 1.2% this year from the 2.6% penciled in April, and to 2.7% in 2020 from 3.0%, Philippine government and private sector trade experts said they are cautious about the chances of the country’s goods in such an environment.
The WTO said in a summary on its Web site that “[t]rade conflicts pose the biggest downside risk to the forecast, but macroeconomic shocks and financial volatility are also potential triggers for a steeper downturn.”
“Trade-related indicators signal a worrying trajectory for world trade based on global export orders and economic policy uncertainty,” the WTO said, noting that “[e]xport and import growth slowed across all regions and at all levels of development in the first half of 2019.”
After falling 1.8% year-on-year to $67.488 billion last year — against a two percent target set by economic managers of the Development Budget Coordination Committee (DBCC) — sales abroad of Philippine products have begun to recover slightly, edging up by a nearly flat 0.1% to $40.391 billion in the seven months to January. July itself marked the fourth straight month of growth at 3.5%.
But in July, the DBCC cut its merchandise export sales projection to two percent for this year from six percent previously “due to slower global growth” and maintained the previous six-percent annual outlook for 2020-2022. Service export growth assumption was cut to nine percent for this year from 10% and set also at nine percent from 11% previously for 2020-2022.
PATH THROUGH DIFFICULTIES
The Department of Trade and Industry’s Export Marketing Bureau (EMB) itself now expects merchandise export sales to increase 1-3% this year, from four percent previously.
Citing a silver lining in US-China trade tensions, DTI-EMB Director Senen M. Perlada said via text: “We hope to gain more modes in the value chain either way for each of these big players.”
“The other strategy we have is to exploit opportunities in and diversify our exports to countries which have a large consumer base but not necessarily part of global production network and value chains where the Philippines is a part of,” Mr. Perlada added.
“That way we somehow isolate ourselves from the contagion effects of a heightened trade war if that really escalates.”
The Philippine Exporters Confederation, Inc. will be maintaining its six percent overall export growth target for the year — consisting of both goods and services — even as it is “not confident” the target will be met.
Philexport President Sergio R. Ortiz-Luis, Jr. said that it has been a “difficult recovery” from negative net exports in the early months of 2019. “We started in the negative this year and have very slowly been moving up only in the last three months. We don’t know if it will be sustained,” he said in Filipino by phone.
For University of Asia and the Pacific Economist George N. Manzano, a former Trade commissioner, the Philippine economy on the whole may not suffer as much as export-driven neighbors like Singapore and Thailand. “Our external sector is going to be weak, so we rely on our local market to carry us through,” Mr. Manzano said, citing support from increased government spending on infrastructure and household spending that contributes about 70% of gross domestic product.
At the same time, the Philippines’ electronics products — which account for about half of overall merchandise exports — bears watching, with overseas sales edging up just 1.1% to $22.378 billion in the seven months to July.
“Our biggest export is in our electronics exports. It’s part of a production network linked to the world economy. This [trade war] can have a slowdown effect on our export sector unless we’re successful in attracting firms that cater to the US and China,” Mr. Manzano said.
Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, Inc., said in an e-mailed response to questions that while the Philippines is a small open economy that can sway with global trade fortunes, its economy is still largely domestically driven. “With the fragility of the external environment, the government should continue its investment in infrastructure development and continue its expansionary fiscal policy reforms and monetary policy easing, assuring against the volatility brought by world trade uncertainties,” he said. — Jenina P. Ibañez