Signs of life returning to Asian trade have stirred up some optimism of a recovery, but a closer look at the data coming out of the region indicates the malaise is far from over.
While export figures from Malaysia and Thailand showed surprising strength in June, trade continues to contract across most of Asia in the face of sluggish global growth, lower commodity prices and weaker demand from China.
“There is hardly any room for cheer,” Taimur Baig, a Singapore-based Deutsche Bank AG economist, said by e-mail. “Substantial recoveries in price and demand, both for commodities and electronics/machinery, are necessary for regional exports to return to trend levels, an outcome that is very unlikely.”
Malaysian exports rose 3.4 percent in June from a year earlier, while merchandise shipments from Thailand gained 1.9 percent. That was in contrast to elsewhere in the region, where exports are still posting declines of more than 10 percent.
Singapore’s non-oil exports — the most commonly-used gauge for trade performance — dropped 10.6 percent last month from a year earlier.
Japan last week said shipments fell 14 percent in the period, the biggest drop since 2009, while in the Philippines, exports declined 11.4 percent in June.
Customs data for Thailand released yesterday showed a 4.4 percent contraction in exports last month.
According to Deutsche Bank’s calculations, Malaysian and Indonesian merchandise exports in the first half of this year were down more than 20 percent compared with two years ago. China and Thailand, with declines of more than 5 percent, were the best performers under this metric, while exports in Singapore and Japan were about 10 percent lower.
China, like every other major economy in Asia aside from Japan and Vietnam, posted a double-digit export contraction last year, according to estimates from Australia and New Zealand Banking Group Ltd (ANZ).
“After what can only be characterized as a dreadful performance over 2015, the cumulative trade performance for 2016, based on year-to-date exports, looks like it could be even worse,” Singapore-based ANZ economist Weiwen Ng (安魏文) said in an e-mail.
The UK’s decision to leave the EU and a global rise in protectionism does not bode well for the trade outlook, while in Japan, a stronger yen is wreaking havoc on the economy.
Credit Suisse said in a report yesterday that global growth will remain lackluster next year at 2.6 percent, compared with an estimated 2.4 percent in this year.
“Without a rebound in private capital expenditure across the world, of which there is little sign as of now, and with Brexit ripples yet to fully unfold, any bounce from trade will likely prove short-lived,” Hong Kong-based HSBC Holdings PLC economist Frederic Neumann said in a report. “That’s especially problematic for Asia: with local demand growing tired, stronger exports are urgently needed.”
Meanwhile, if US Republican presidential candidate Donald Trump wins the White House in November, the global economy could slip into recession, according to a forecast from Citigroup Inc on Thursday.
In a research note, a team led by the US bank’s chief economist Willem Buiter said the election was a major source of uncertainty in the global economy.
Presuming increases in global uncertainty and tightening of US financial conditions, “a Trump victory could lower global GDP growth by around 0.7-0.8” percentage points, “pushing GDP growth easily below our benchmark for a global recession,” the note said.
Additional reporting by AFP
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