Oct exports slump, prospects bleak
Reuters | 12/10/2008 10:42 AM
Printer-friendly version | 
Send to friend | 
Share your views
Philippine exports in October fell from the year earlier by the most in nearly seven years as shipments of key electronics tumbled. The head of an industry group warned of more export pain to come.
Some of the Philippines' major demand centres, including the United States, euro zone and Japan, are in recession, so analysts expect weak exports to drag on growth in the Southeast Asian economy.
Exports in October dropped 14.9 percent from a year earlier, the biggest drop since 24.3 percent in December of 2001. Electronics exports, which make up about three-fifths of the total, slumped 18.9 percent from a year earlier, government figures showed on Wednesday.
"The Philippines, with its high exposure to the tech sector, is all the more vulnerable to the sharp global downturn," said Vishnu Varathan, economist at Forecast Pte in Singapore.
Arthur Young, chairman of the Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI), forecast that electronics exports will fall 5-8 percent this year and 8-10 percent in 2009. They rose 4.5 percent in 2007.
"There's no demand," he told Reuters in an interview. "The industry wasn't doing so badly before October, and October came and the whole thing put brakes and it became a total deterioration through the process."
Three-quarters of electronics exports are made up by semiconductors, mainly chips and micro processors for mobile phones, computers and automobiles.
The Philippines supplies about 10 percent of the services, largely consisting of assembly work, for the world's semiconductor manufacturing industry.
Young said industry estimates show global demand for PCs would fall about 5 percent in 2009 and for mobile phones it would drop 9 percent in volume terms.
Reflecting the strain of the global downturn on the technology sector, Japan's Sony Corp. said on Tuesday it would cut 16,000 jobs -- the biggest in Asia so far in the financial crisis. It plans various measures to save $1.1 billion a year at its ailing electronics operations.
Chip maker Texas Instruments and Korean electronics giant Samsung Electronics Co. Ltd. also warned of weak demand as recession engulfs the United States and parts of Europe.
Weak demand
Asian exports have deteriorated sharply in recent months as the downturn hit global trade. The World Bank has forecast that world trade will contract next year for the first time since 1982, suggesting any recovery is a long way off.
"It's really driven by how fast consumer sentiment can get into the market, and people start buying laptops, people start buying new cellphones and people start buying new cars," Young said. "Those are our end markets, and that's the challenge."
Total exports in the first 10 months of 2008 rose just 1.94 percent from a year earlier, running below the government's forecast of 2-4 percent export growth for the whole year. Exports increased 6 percent in 2007.
"On the whole, it would seem that a softer external sector will inevitably drag on the economy and the ripple effect from this will impact the economy rapidly," Varathan said.
The government expects the economy to grow 3.7-4.7 percent next year after an estimated 4.1-4.8 percent expansion this year.
