UK-BASED think tank Oxford Economics said the recent weakness in goods trade has been concentrated in Asia and Europe, noting that the trend of ‘slowbalization,’ which was visible since the global financial crisis, will persist.
Oxford said the outlook for world goods trade growth remains “relatively downbeat.”
“Our baseline forecast is a shallow trade recession, with world trade in goods dropping 1.5 percent this year before staging a modest recovery in 2024 with growth of 2.3 percent,” the UK-based think tank said in a research briefing on Wednesday.
From 2019 to 2024, Oxford Economics’ forecasts show that world trade in goods will grow at a similar pace to world gross domestic product (GDP) which is around 2 percent per year.
This, it said, means that the trend of ‘slowbalization’ visible since the global financial crisis, featuring a flat global goods trade-to-GDP ratio, will persist.
Geographically, Oxford said the recent weakness in goods trade has been concentrated in Asia and Europe.
In fact, it said “world import volumes fell by around 2 percent year-on-year in May to June this year, declining 6 to 8 percent year-on-year in advanced Asia and 4 percent in the eurozone.”
Meanwhile, the UK-based think tank noted that a “weakening” trend is also visible in recent data from China and other parts of emerging Asia.
Philexport’s take
At a recent media briefing, Philippine Exporters Confederation Inc. (Philexport) President Sergio R. Ortiz-Luis Jr. revealed that while the country’s exports are growing, “it’s growing very slowly.”
The Philexport chief pointed to the effect of the geopolitics to the extent that the country’s supply chain is affected, mainly because the Philippines’s biggest trade partners were affected. In particular, he said, China slowed down in a way and this affected the Philippines.
The research briefing of Oxford highlighted that “China’s exports and imports are on a negative trend with particularly weak figures in July,” adding that this reflects a variety of factors including trade restrictions, sluggish Chinese consumer spending, and the ongoing real estate crisis.
“Economic weakness in China has already had a significant negative impact on trade in the rest of Asia, visible in some striking recent numbers from individual Asian economies,” the UK-based think tank said.
Moreover, further spillovers to world trade from “depressed trade” in China could be substantial, slowing industrial expansion in the region and hitting commodity prices, which damages both the exports and imports (via negative terms of trade effects) of major commodity exporters, Oxford said.
Last week, the Semiconductor and Electronics Industries in the Philippines, Foundation Inc. (Seipi) revised its growth target for electronics exports from 5 percent to zero percent for 2023 due to the ongoing geopolitical conflicts such as the trade war between the United States and China.
Seipi President Danilo C. Lachica revealed that the earnings from electronics exports from January to June 2023 is almost 7 percent down from the US$22.78 billion recorded in 2022 to US$21.19 billion in 2023.
The US$21.19 billion earnings from electronics exports recorded in the first half of 2023 is equivalent to 60.63 percent of the Philippine exports pie.
Seipi data showed the top five export destinations of electronics exports in June 2023 were Hong Kong with 20.82 percent the USA with 14.17 percent, China with 11.13 percent, Japan with 7.32 percent and Singapore with 6.27 percent.