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Europe's economic woes hit Southeast Asian exporters

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Deutsche Welle

<div class="embed-wrap"><figure data-feedback="fb:likes,fb:comments"><img alt="The European Union (EU) flag flies in the wind as visitors pass by at the observatory dome of the Reichstag in Berlin, Germany, 19 May 2022. EPA-EFE/OMER MESSINGER" src="https://sa.kapamilya.com/absnews/abscbnnews/media/2022/overseas/10/26/20221026-eu-flag-epa.jpg"/><figcaption>The European Union (EU) flag flies in the wind as visitors pass by at the observatory dome of the Reichstag in Berlin, Germany, 19 May 2022. <em>EPA-EFE/OMER MESSINGER</em></figcaption></figure></div><p>Southeast Asian exports are beginning to be hit by the economic challenges faced by Europe, as concerns grow that possible recessions in the West could also strain Southeast Asia&#x27;s economic recovery efforts well into 2023.</p><p>Spiking inflation and energy costs, as well as other economic impacts of the Ukraine war, are likely to see European economies struggle over the coming 12 months, with consumers cutting back on spending.</p><p>This is expected to have a significant impact on Southeast Asian exporters, particularly those in textile manufacturing, the largest export sector for several countries in the region.</p><figure class="op-interactive"><iframe height="315" src="https://www.youtube.com/embed/yWGlAnclW1g?enablejsapi=1" width="560"></iframe></figure><div class="iwantbar">Watch more News on <a href="https://www.iwanttfc.com/#!/browse/Genres/News/tag_id_genres/id_news" target="_blank">iWantTFC</a></div><div><strong>Dark economic forecasts for 2023</strong></div><p>The World Bank has warned that the world is edging towards a global recession next year, possibly leading to a string of financial crises in emerging markets and developing economies, according to a study it published last month.</p><figure class="op-interactive"><iframe height="315" src="https://www.youtube.com/embed/m3eVB3E2W3U?enablejsapi=1" width="560"></iframe></figure><div class="iwantbar">Watch more News on <a href="https://www.iwanttfc.com/#!/browse/Genres/News/tag_id_genres/id_news" target="_blank">iWantTFC</a></div><p>Fitch Solutions, a financial research company, expects the US to suffer a &quot;mild recession” in late 2023. The International Monetary Fund, or IMF, reckons the eurozone area will see growth of 3.1% in 2022 and just 0.5% 2023, according to its latest outlook published this month.</p><p>&quot;The decline in exports [from Southeast Asia] will worsen,&quot; said Brian Lee Shun Rong, an economist at Malaysia&#x27;s largest financial services group, Maybank.</p><p>&quot;Global growth will likely cool further, and recessionary risks are climbing. The EU may head into a recession as it continues to face supply and cost of living shocks from the Russia-Ukraine war,&quot; he told DW.</p><figure class="op-interactive"><iframe height="315" src="https://www.youtube.com/embed/fLuSMY5EkoU?enablejsapi=1" width="560"></iframe></figure><div class="iwantbar">Watch more News on <a href="https://www.iwanttfc.com/#!/browse/Genres/News/tag_id_genres/id_news" target="_blank">iWantTFC</a></div><div><strong>Export numbers declining</strong></div><p>More precise trade figures from Southeast Asia will likely be released later this year, but across mainland Southeast Asia, preliminary numbers show exports have been declining since July.</p><p>In 2022, the export of Cambodia&#x27;s textile goods, which account for more than half of the country&#x27;s overall exports, grew year-on-year by 37% between January and June but slowed to 19.9% in July and just 2.7% in August.</p><p>Exports in total decreased by 7.5% in September, compared to the same month last year, according to data from the Cambodian General Department of Customs and Excise.</p><p>Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia, an industry body, told DW he thinks Cambodia&#x27;s exports to European markets will continue to decline in the fourth quarter of this year and into 2023.</p><p>Vietnam, whose trade with EU markets soared by 14.8% last year to $63.6 billion (€64.4 billion), saw its exports decline by 14% between August and September, with many factories already suspending operations, according to Vietnam government data that was reported by local media.</p><p>Vietnam&#x27;s monthly goods export growth could slip to single digits or even into negative territory in the fourth quarter of this year and early 2023, said Rong of Maybank.</p><p>In Malaysia, export growth looks strong in 2022 at 26%, but is expected to fall to 1.3% in 2023, according to UOB Research, the analytical wing of the Singapore-based bank, UOB.</p><p>Thailand and Myanmar, other major textile exporters, have also reported a drop in exports to EU states.</p><p>&quot;Inflation and looming recession in Europe have led to slowing exports from Southeast Asia,&quot; said Lay Hwee Yeo, director of the European Union Center in Singapore. &quot;The economic slowdown in the EU will certainly have a knock-on impact on Southeast Asian countries as the EU is one of the top four trading partners of many Southeast Asian countries,&quot; he told DW.</p><div><strong>Slowdown, not a meltdown</strong></div><p>The EU is the third largest trading partner of the 10-state Association of Southeast Asian Nations (ASEAN), accounting for around a tenth of the region&#x27;s annual trade but a far higher share of its overall exports.</p><p>Compounding the problem, many European buyers now have an &quot;inventory glut&quot; after a surge in trade in the early months of 2021 and an over supply during the post-pandemic recovery, said Loo from the Cambodian garment makers&#x27; association.</p><p>However, business interest groups have presented a rosier picture for near term trade between Europe and Southeast Asia.</p><p>Chris Humphrey, executive director of the EU-ASEAN Business Council, which represents European businesses in Southeast Asia, said European investment in the region had &quot;rebounded strongly&quot; after reaching $25.5 billion in 2021.</p><p>Europe&#x27;s bilateral trade with the 10-members of ASEAN had nearly recovered to pre-pandemic figures by the close of 2021, when it was worth $270 billion, he added.</p><p>&quot;There has been a strong bounce back in trade between the European Union and ASEAN in 2021 and continuing through the first part of 2022, as both regions begin their recoveries from the worst of the COVID-19 pandemic,&quot; he told DW.</p><p>A tapering off of trade over the coming months is not unexpected, Humphrey said, but &quot;we remain confident about the strong trade and investment ties between the EU and ASEAN going forward.&quot;</p><p>Trinh Nguyen, a senior economist covering Asia at French investment bank, Natixis, told DW that businesses should expect &quot;a slowdown, not a meltdown of exports.&quot;</p><p>Not all Southeast Asia markets will be impacted in the same way, with export-oriented economies like Vietnam and Cambodia expected to be more exposed to Western economic problems as they have a high share of exports to GDP, Nguyen added.</p><p>The other problem for the region&#x27;s economies is that Chinese demand is not likely to recover meaningfully enough to pick up the slack, she said. Furthermore, European and American markets, two key purchasers for Southeast Asian goods, could experience minor recessions at the same time.</p><p>Edited by: Wesley Rahn</p>

Southeast Asian exports are beginning to be hit by the economic challenges faced by Europe, as concerns grow that possible recessions in the West could also strain Southeast Asia's economic recovery efforts well into 2023.