Southeast Asian exports predicted to recover next year
Southeast Asian exports predicted to recover next year
HONG KONG (Reuter): Southeast Asian exports will bounce back from this year's sudden decline, but economists warned yesterday the recovery will be patchy and fail to match the heady rates of the past two years.
"The extent of the slowdown in the first half this year will limit the upside for the full year, but demand conditions should improve in 1997," ING Barings said in a report.
Around the region, exports growth slumped to seven percent in the first half of the year, compared with a 30 percent increase last year. First improvements are expected to surface in early 1997, but economists warned that the complex nature of Southeast Asian trade dictates an uneven regional recovery.
"The only unifying theme in this case is that there isn't any," said Andrew Freris, chief economist at Salomon Brothers.
A number of country-specific factors combined with an inventory correction in the United States, particularly in the electronics sector, threw Asia into a tailspin, suggesting its competitiveness is declining.
"The key to understanding the so-called 'Pan-Asian exports growth' decline is to appreciate different explanations apply to different countries, thus undermining the notion that there is a common trend of loss of competitiveness," Freris said.
In fact, economists said many Southeast Asian nations are successfully diversifying away from low value-added, cheap labor products into higher value-added, more competitive goods.
As one of Asia's most developed economies, Singapore was most affected by the U.S. electronics inventory adjustment.
It is expected to report a slide in exports growth to three percent in 1996 from 13.8 percent last year, with recovery to 12.5 percent forecast next year.
By comparison, both Malaysia and Thailand showed surprising resilience to the electronics slowdown despite their dependence upon the U.S. market through trade links with Singapore.
In Malaysia, exports fell sharply but imports -- which in Asia tend to be export-regenerating rather than consumer-driven -- sank even more dramatically.
This allowed Malaysia to improve its trade deficit to US$0.5 billion at the end of June compared with US$1.34 billion in the same period last year, which will make a positive contribution to Malaysia's forecast economic growth rate of 8.5 percent.
Indonesia
Economists said one Southeast Asian nation that can be accused of losing its competitiveness is Indonesia, even though exports should fall only two percent to 11.4 percent this year.
"Rising labor costs in Indonesia following a decade of substantial economic progress and the emergence of new players elsewhere in Asia, particularly in the textile and garments sector, have eroded competitiveness by more than the exchange rate regime can compensate," ING Barings said.
Indonesia's rupiah declines between three and five percent each year, partly to support its export competitiveness.
Thai exports crashed across the board, but Asian economists said an unusually high base of comparison thanks to a bumper rice crop last year overstates the damage. Exports are forecast to rise 13.3 percent in 1997 from 9.8 percent this year.
Closer examination also reveals a successful attempt at economic diversification. Weak exports of lower value-added goods obscure a rising contribution from electronic components.
"(This) belies the current fashionable view that Thailand may be in the throes of a structural crisis in terms of its exports composition as it loses its competitive edge against other Asian economies," Salomon Brothers said in a report.
The Philippines actually bucked the trend. Although exports grew by only 19.4 percent in the first half this year compared with 33.6 percent last year, electronics exports reported a 51.4 percent increase in May as new capacity came on stream.
Most of the weakness in the Philippines came from garment and coconut products, which were affected by poor weather.