CHINA’S ECONOMIC SLOWDOWN will likely dampen Philippine exports and potentially lead to lower investments, according to experts.
“China’s slowdown will weigh directly on the Philippines’ exports, and lower export earnings will suppress investment and consumption,” Makoto Tsuchiya, economist from Oxford Economics, said in an e-mail.
Mr. Tsuchiya said China’s economy is projected to expand by 5.1% this year, and by 4.6% in 2024.
This is in line with the China growth projections by the multilateral lenders World Bank (5.1% this year) and Asian Development Bank (4.9%). S&P Global Ratings last month cut its growth forecast for China to 4.8% this year from 5.2% previously.
International Monetary Fund Mission Chief to the Philippines Shanaka Jayanath Peiris last week said the impact of China’s slowdown will depend on the Philippines’ exposure to the Chinese economy.
“Philippines, out of all Asian countries, is less exposed to China,” he said.
“The service sector is doing well; goods sector globally is not doing very well. Philippines is more of a services-driven economy, so it benefits more on whatever the current level of global growth is. Also, Filipinos cater a bit more to the US market than the China market.”
The United States is top destination of Philippine-made goods. Of the Philippines’ total exports of $6.14 billion in July, the US accounted for 16.9% or $1.04 billion.
China was the Philippines’ fourth top export trading partner in July, making up 12.3% or $758.22 million of the month’s total.
However, Confederation of Wearables Exporters of the Philippines Executive Director Maritess Jocson-Agoncillo said the slowdown in China is already being “felt” by the export industry.
“In terms of investment, as much as we were expecting to catch a windfall of investments from China, these past two years, with the US imposing trade restrictions on Chinese goods, we are not seeing any new investments from China at the moment,” she said in a Viber message.
Ms. Jocson-Agoncillo said the export industry is seeing a negative trend by end-2023, largely due to the slowing global demand.
“Buyers tend to source from cheaper neighboring ASEAN (Association of Southeast Asian Nations) countries. For example, a major European brand pulled out sourcing from the Philippines mid-2023,” she added.
Oxford Economics’ Mr. Tsuchiya said dampened investor sentiment in the region may also lead to capital outflows and weaker currencies. This could add pressure to Philippine inflation, which would also make the Bangko Sentral ng Pilipinas’ job more difficult.
ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the slowdown of the world’s second-largest economy will directly impact the Philippines’ growth prospects.
He noted China is one of the country’s major trading partners and holds a significant importance in the Asian supply chain.
“However, the better-than-expected resilience of the US economy, which is also a major source of tourism and trade for the Philippines could be a potential offset to the slowdown in China,” Mr. Mapa said.
“In terms of trade, the Philippines can also explore trading opportunities with other countries, case in point with the US given its better-than-expected performance of late,” he added.
Mr. Mapa said China was the Philippines’ biggest source of visitor arrivals prior to the coronavirus disease 2019 (COVID-19) pandemic, but so far Chinese tourists have not returned to the country.
Chinese tourist arrivals surged by 38.58% to 1.74 million in 2019. Of the 2.02 million foreign arrivals in 2022, China only accounted for 39,627.
“The Philippines can hopefully work double time to improve our tourism sector to attract the few Chinese tourists that are still able to travel while also finding other sources of tourist arrivals,” Mr. Mapa said. — Keisha B. Ta-asan
