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26 Dec 2017

International Economy

The Philippines: Rising Market of ASEAN (Current Issue No. 2887 Full Ed.)

Thai exports to ASEAN-5 (Malaysia, Singapore, Indonesia, the Philippines and Brunei) account for 59.3 percent of our total exports to the entire ASEAN region (9 countries), mostly consisting of intermediate goods supplying their manufacturing sectors. Although our exports to ASEAN-5 typically increase only 2.8 percent p.a. over the past 10 years, that performance is sustainable given that a large proportion of the intermediate goods they buy have larger profit margins than the commodities we sell that are subject to price volatility, as experienced with our major exports to the CLMV. Amid a declining trend in Thai outward trade to the ASEAN-5, Thai exports to the Philippines – our fourth largest market in the ASEAN-5 – have risen converse to the trend elsewhere. Over the period of 2008-2016, growth averaged 8.7 percent p.a., while in 2016, it was 6.8 percent, beating other ASEAN markets.

KResearch thus estimates that Thai exports to the Philippines may increase 8.9 percent over-year in 2017 to reach a total value of USD6.966 billion, and will continue to grow 6.0 percent in 2018 to an aggregate value of USD7.384 billion, which would be the second highest performance for Thai exports to ASEAN, after the 10.5 growth expected for Vietnam.

With regard to the Philippines' import structure, most of their imports are intermediate and capital goods for domestic production and re-export, which is consistent with our exports sent there. Our top export category with them is automobiles and parts, in response to the Philippines' high auto import growth, averaging 6.4 percent, 2013-2016, amid a flourishing economy and thus greater domestic demand. Thailand also sends them intermediate raw materials, which constitute the largest proportion of the Philippines' imports. Furthermore, they also import our consumer goods in large quantities, realizing the highest growth rate of all their import categories at 9.6 percent p.a. over the past four years, given their buoying domestic consumption, as well. Our best performing exports in this category are personal care products and processed foodstuffs.

A promising outlook is thus expected for Thai exports to the Philippines. There are two key reasons, i.e.: 1) the Philippines' important role in regional supply chains – Thailand will benefit from our shipments of intermediate electronics parts sent to Philippines' downstream electronics production; and, 2) the potential of their large market where middle-income earners are rising in number.

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International Economy