Has Slowing Philippine Exports Been Indicative Of Asia's Trend?

Rebecca Wilder of News N Economics exhibits concern over the slowing growth in Philippine exports as portentous of a slowdown for Asia.

She writes, (bold highlights mine)

``But the Chinese release overshadowed the Philippines April trade report, which in my view, illustrates more transparently the slowdown in external demand that is likely underway across the region. In the Philippines merchandise exports increased 27.4% over the year in April, which was half the rate of the Bloomberg consensus and that in March, 42.7% and 43.8%, respectively.

``A negative export growth trend has been established - explicitly in the Philippines and likely going forward in China (see Goldman Sachs report below). And these countries have strong trade ties with Europe - the Eurozone was 15% of 2009 world GDP (PPP value) according to the IMF.

``Therefore, recent nominal appreciation of the Philippine peso and Chinese yuan against the euro, and expected real appreciation - Europe's self-imposed economic contraction stemming from harsh fiscal austerity measures will drag prices downward - may very well hamper the economic recovery for key Asian economies via the export channel."

I see this dynamic from a distinct prism.

Looking at the broader picture, Philippine share of external trade has been slowing-- from 100% (2004) to about 60% (today) of GDP, according to the chart from Google/World Bank. Even China's external trade has been slowing.

Alternatively this means economic growth is becoming more domestic oriented.

Yet, this comes in the backdrop of an ascension of global trade.

Growing global trade amidst a slowdown in China's share suggest that the global share of the export pie is becoming more diffused, as more nations participate.

The implication: global economic growth isn't anchored on China, nor is it predicated on exports.

Moreover, there are many factors that drive economics more than just a simplistic currency-export-economic growth model.

The following is the export performance of the Philippines, China and the world (top window) as well as the Philippine Peso (bottom window).

What I want to show is that Philippine exports peaked in 2002-2004 even when the Peso continued to fall. The Peso reached a trough of 56.20+ to a US dollar in September of 2005. That's ONE year after. Yet Philippine exports haven't picked up.

So the Philippine case essentially invalidates the assumption that weak currency equals strong export growth.

And I think this applies also elsewhere, for the simple reason that export products and markets are not homogeneous, which implies diverse degree of price sensitivity. In the information age, we are increasingly witnessing niche (tribal) markets.

Let me further show that measuring Philippine exports is relative.

As the chart from NSO illustrates, it is a mirage to think that 40+% growth momentum will be sustainable. And falling off the high "growth" levels need not translate to alarm bells.

That's because in reality, markets don't move in a straight line.

Taking a look at the breakdown of products exported, they only show that the export growth has been "broad based" (from manufacturing to commodity)--premised on a year to year comparison. This further suggests that any slowdown may be temporary.

Therefore, interpretations of a pause as impending signs of doom seem unwarranted.

Looking from the Philippine perspective, this implies that if micro developments refutes the macro interpretation, then the latter is likely an inaccurate assessment.