Experts predict that it is probable for Philippine exports to decrease and potentially result in reduced investments.
Makoto Tsuchiya, an economist from Oxford Economics, stated in an email that the decline in China’s economy will have a negative impact on the Philippines’ exports. As a result, the decrease in export earnings will hinder investment and consumption.
According to Mr. Tsuchiya, China’s economy is expected to grow by 5.1% in the current year and by 4.6% in 2024.
This aligns with the predicted growth for China from the World Bank (5.1% for this year) and the Asian Development Bank (4.9%). Last month, S&P Global Ratings lowered their growth estimate for China to 4.8% for this year, down from their previous prediction of 5.2%.
Last week, Shanaka Jayanath Peiris, the International Monetary Fund’s Mission Chief to the Philippines, stated that the effect of China’s decline in economic growth will vary depending on the extent of the Philippines’ connection to the Chinese economy.
He stated that among all Asian nations, the Philippines has the least exposure to China.
“The service industry is thriving, but the global goods sector is struggling. The Philippines’ economy is primarily driven by services, making it advantageous.”fi
The focus is primarily on the current state of global economic growth. Additionally, Filipinos tend to prioritize the US market over the Chinese market.
The US is the primary recipient of goods produced in the Philippines. Out of the total export value of $6.14 billion in July, the US accounted for 16.9% or $1.04 billion.
During the month of July, China was the fourth largest trading partner for the Philippines and accounted for 12.3% of their total exports, totaling $758.22 million.
Unfortunately, according to Maritess Jocson-Agoncillo, Executive Director of the Confederation of Wearables Exporters of the Philippines, the export industry is already experiencing the impact of China’s slowdown.
According to a message sent through Viber, we were hoping to receive a significant amount of investments from China. However, due to the trade restrictions imposed by the US on Chinese products in the last two years, we have not seen any new investments from China at this time.
According to Ms. Jocson-Agoncillo, the export sector is experiencing a decline in growth by the end of 2023, primarily due to a decrease in global demand.
“According to her, buyers have a tendency to purchase from less expensive neighboring countries in the ASEAN (Association of Southeast Asian Nations) region. As an example, a well-known European brand stopped sourcing from the Philippines in the middle of 2023.”
According to Mr. Tsuchiya from Oxford Economics, decreased confidence from investors in the region could result in money leaving and currencies becoming less strong. This could also cause added stress on Philippine inflation, making the job of the Bangko Sentral ng Pilipinas more challenging.fficult.
According to Nicholas Antonio T. Mapa, Senior Economist at ING Bank N.V. Manila, the Philippines’ growth potential will be affected by the deceleration of the world’s second-largest economy.
cant share of the country’s exports
China is a significant trading partner for the country and accounts for a large portion of its exports.fi
The significance in the supply chain of Asia cannot be overstated.
According to Mr. Mapa, the US economy’s strong performance, along with its role as a significant source of tourism and trade for the Philippines, could potentially counterbalance the slowdown in China.
He mentioned that the Philippines could consider trading with other countries, specifically the US, as it has shown strong performance recently.
According to Mr. Mapa, before the COVID-19 pandemic, China was the primary country of origin for visitors to the Philippines. However, Chinese tourists have yet to resume visiting the country.
The number of Chinese tourists visiting increased by 38.58% to reach 1.74 million in 2019. Out of the total 2.02 million foreign arrivals in 2022, China accounted for only 39,627.
“The Philippines can potentially double its efforts in enhancing the tourism industry to entice the limited number of Chinese tourists who are able to travel amidst the current circumstances.” fi
According to Mr. Mapa, finding alternative methods for attracting tourists is important.