Asia’s Export Engine Slowing Down
Summary
How does weaker global demand impact the export growth of Asian economies? Christiaan Tuntono, Senior Economist for Asia Pacific at Allianz Global Investors highlights the main factors affecting the demand for Asian exports and which Asian economies are highly sensitive to weakening global demand.
Key takeaways
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As global goods demand fizzles and progresses more towards services, we expect Asia’s merchandise trade growth to weaken further. There are two forces at play: (1) weakening developed market demand; and (2) a payback for the over-drafted demand for Asian exports during the pandemic.
The recent weakness in Taiwan’s new export orders suggest further slowdown in Asian exports which are tech heavy. That said, slowing global demand is likely to impact Asian economies to a varying degree, contingent upon the export composition of each.
In terms of export growth sensitivity, we found that Australia’s exports are the most sensitive to global demand change, while those from China is the least. In terms of GDP growth sensitivity, we found that small-open economies like Singapore, Hong Kong and Taiwan are more sensitive to the final demand of the world’s major markets vis-a-vis the big-terrestrial economies like China, Indonesia, Japan and India.
Besides external trade, weaker exports are also expected to weight on the domestic demand of the Asian economies, slowing down growth recovery.
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