With their major trading partners, the US and China, showing impressive signs of economic recovery after a rather slow 2020, exports for all ASEAN-6 economies (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) have now exceeded pre-pandemic levels, according to a comprehensive report released by the Oxford Economics. This boost in export is set to lead to 6.6ppts GDP growth in 2021, after subtracting 4.9ppts in the past year.
Vietnam and Malaysia specifically have outstripped others in exports performance. In seasonally adjusted terms, export volumes were up 25.5% in Vietnam and 17% in Malaysia in Q1 2021 from pre-pandemic levels. In comparison, the Philippines’ exports were only marginally better – up 0.5%.
In line with recent trends, Oxford Economics forecast the ASEAN-6's exports will boost their GDP growth this year after being a drag last year. Singapore plays a unique role as a regional trading hub, with total exports exceeding 175% of GDP. Other than Singapore, the global forecasting and quantitative analysis company also expects Vietnam to see the largest contribution to 2021 growth from exports (10.4ppts), with Malaysia following closely behind. The relatively large contribution for Thailand is partly due to a very low base after a significant contraction last year.
Outlook bright for electronics and medical products export
Exports of electronics and pharmaceutical goods have outperformed over the past year, with the trend persisting in 2021. A strong demand for semiconductors and COVID-related medical products in the short-term will benefit trades from Malaysia, Singapore and Vietnam.
However, a global chip shortage, largely a result of strong demand and lost output, could temporarily disrupt the semiconductor market. A sharp rise in demand for products critical to battling the coronavirus pandemic is also temporary in nature, but the demand will likely linger for longer given continuing outbreaks experienced by the ASEAN-6.
Agricultural exports will also continue to be a stable source of income for the region, except for the Philippines, where production of bananas suffered heavily from Panama disease and typhoon. Bananas make up 33% of the country’s agricultural exports.
Meanwhile, global output of foods, beverages and other consumer goods will increase sharply this year as pent-up demand is released. Agricultural production in the Asia Pacific is foreseen to outpace production in other regions for the next decade.
In a previous research by Oxford Economics, Vietnam and Malaysia ranked as most attractive destinations for export-oriented FDI in Asia, thanks to their low labor cost, improving infrastructure and business-friendly policies. In 2019, Vietnam’s FDI inflows contributed to about 5% of the country’s GDP.
The Ministry of Industry and Trade, on their part, acknowledges the impact of free trade agreements being implemented in a more comprehensive and effective manner. These agreements, inked by Vietnam and its major economic partners, will continue to create conditions for Vietnamese goods to enter foreign markets with preferential tariffs.
According to the ministry, the total trade value of goods in the first five months of 2021 increased by 33.5% year on year to US$262.25 billion.Specifically, in the first five months of 2021, the export value of goods was at $130.94 billion, up 30.7% over the same period last year.
The US continues to be Vietnam's largest export market with a turnover of $37.6 billion, up 49.8% over the same period last year; followed by China with $20.1 billion, up 26%.
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But then, COVID-19 is still here
The recent and worsening outbreaks in the Southeast Asian countries, including those that have managed to control the health crisis last year, are starting to impact their economies.
Vietnam, which is battling its fourth and most serious wave of local infections, already saw a decline in its trade activities and production of export goods in May. The country has already recorded more than 9,000 cases and 54 deaths — and these figures are seen to rise in the coming days.
Thailand and Malaysia are suffering worse scenarios, with more than 180,000 and 600,000 cases, respectively. Indonesia and the Philippines are, unfortunately, still the hardest hit since last year.
The region is now stumbling to roll out COVID-19 vaccines, but the supply remains low, not to mention the lack of facilities and comprehensive policies to hold mass inoculations.
Global health experts warned that the ASEAN economies face mounting challenges in the weeks to come, with healthcares systems at risk of being completely overwhelmed and the overall economy going down as manufacturing and trade get hit by lockdowns and restrictions.
"Lives and livelihoods are at stake, as is the sustainable development of a Region that is home to over 2 billion people — one-fourth of the world’s population. It is only through solidarity, and by sustaining Region-wide resolve, that we can drive infection down, prevent new waves, and bring evidence-based treatments and technologies to all who need them," said Dr. Poonam Khetrapal Singh, Regional Director, WHO Southeast Asia.