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The strong rebound in global economic growth in the first half
of 2021 has driven a significant upturn in Asia Pacific merchandise
exports. This has further improved the overall Asia Pacific export
growth outlook for 2021. Asia Pacific exports are forecast to show
buoyant expansion of 13% year on year (y/y) in 2021, after
contracting by 1.8% y/y in 2020. IHS Markit estimates that global
trade volume contracted by 5.4% in 2020. A recovery is forecast in
2021 and 2022, with global trade volume to recover by 6.0% and
3.7%, respectively.
Key findings
A strong economic recovery is expected in 2021, with Asia
Pacific GDP growth forecast at 6.2% y/y, based on expectations that
there will be progressive rollout of COVID-19 vaccines during
2021.
A key factor underpinning the strong economic rebound in the
Asia Pacific region is expected to be buoyant economic growth in
China, which is forecast to grow at 8.3% y/y in 2021.
The export rebound has been reflected in recent trade data from
many Asia Pacific economies, helped by base year effects owing to
pandemic-related lockdowns in the first half of 2020. For mainland
China, merchandise exports rose by 27.9% y/y in May 2021. South
Korea's exports have also shown buoyant growth, rising by 45.6% y/y
in May.
In the ASEAN region, Singapore's non-oil domestic merchandise
exports have also shown an upturn, rising by 6.0% y/y in April,
helped by a 10.9% y/y rise in electronics exports.
Vietnam's merchandise exports showed buoyant growth in the
first four months of 2021, rising by 29.6% y/y, helped by rapid
growth of 30.7% y/y for exports of mobile phones and parts.
Over the medium-term outlook, Asia Pacific exports are expected
to grow at a rapid pace, helped by the sustained strong growth of
intra-regional trade within Asia Pacific, as China, India, and the
Association of Southeast Asian Nations (ASEAN) continue to be among
the world's fastest-growing emerging markets.
Global growth and trade rebound
With world GDP forecast to rebound to growth of 5.7% y/y in 2021
after a contraction of 3.5% y/y in 2020, this is expected to
provide a boost to the export sectors of many export-driven Asia
Pacific economies. The rebound in economic growth in advanced
economies such as the United States, the European Union, the United
Kingdom and Canada, combined with continued strong economic
momentum in China, are linked to the rapid rollout of vaccination
programmes during the first half of 2021. This has supported
improving Asia Pacific new export orders to key export markets in
North America and Europe.
This is expected to support the growth of exports of
manufactured goods and commodities through the course of 2021. Asia
Pacific merchandise exports are forecast to show a strong rebound
of 13% y/y in 2021, after contracting by 1.8% y/y in 2020. IHS
Markit estimate that global trade volume contracted by 5.4% in
2020. A recovery is forecast in 2021 and 2022, with global trade
volume to recover by 6.0% and 3.7%, respectively.
However, because of ongoing new COVID-19 waves in many Asia
Pacific nations in the first half of 2021, international travel
restrictions are still expected to remain a major impediment to the
recovery of international tourism and travel in the Asia Pacific
region during 2021. This is expected to result in a more protracted
and gradual recovery path for trade in services for many Asia
Pacific economies.
Recovery in Asia Pacific exports
The Asia Pacific region experienced a recession in 2020 owing to
the COVID-19 pandemic, with the region's GDP contracting by an
estimated 1.1% y/y. Pandemic-related lockdowns and travel bans
severely hurt the economies of most Asia Pacific nations during the
first half of 2020. However, during the second half of 2020, many
Asia Pacific economies recovered significantly in economic
momentum. This upturn was driven both by strengthening global
export demand as well as the rebound in domestic consumption
spending as a result of the easing of pandemic-related restrictions
in many countries.
A strong economic recovery is expected in 2021, with Asia
Pacific GDP growth forecast at 6.2% y/y, based on expectations that
the progressive rollout of COVID-19 vaccines during 2021 will help
the gradual recovery of economic activity in many OECD and Asia
Pacific economies.
A key factor underpinning the strong economic rebound in the
Asia Pacific region is expected to be buoyant economic growth in
China, which is forecast to grow at 8.3% y/y in 2021. However, the
Asia Pacific recovery is expected to be broad-based, with most
major Asia Pacific economies forecast grow rapidly in 2021, albeit
the momentum of recovery is being dampened by severe new COVID-19
waves in some countries.
The improving economic momentum in the Asia Pacific region has
been reflected by the IHS Markit Asia Pacific PMI survey index of
manufacturing output, which has recovered strongly in recent
months. The index has signalled the most robust expansion of
production in a decade during the first half of 2021, albeit with
the rate of expansion cooling in some countries during second
quarter 2021 owing to the impact of new COVID-19 waves.
The export rebound has been reflected in recent trade data from
many Asia Pacific economies, albeit also reflecting low base year
effects from the lockdowns in the first half of 2020.
For mainland China, merchandise exports rose by 27.9% y/y in May
2021. South Korea's exports have also rebounded strongly, rising by
45.6% y/y in May 2021. Taiwan's exports rose by 38.6% y/y in May,
the 11th consecutive month of positive export growth, buoyed by
strong growth in exports of electronics, chemicals, and
plastics.
In the ASEAN region, Singapore's non-oil domestic merchandise
exports have also shown an upturn, rising by 6% y/y in April,
helped by a 13% y/y rise in electronics exports. Vietnam's
merchandise exports showed buoyant growth in the first four months
of 2021, rising by 29.6% y/y, helped by rapid growth of 30.7% y/y
for exports of mobile phones and parts.
In Australia, merchandise exports rose by 15.9% y/y in April,
boosted by buoyant mineral commodities prices, notably for iron ore
and coal, two of Australia's largest commodity exports. Despite
severe trade measures imposed by mainland China on a wide range of
Australian exports during 2020-21, Australian exports to mainland
China rose by 11.2% y/y in April, reflecting very high world prices
for iron ore and coal.
The recovery of Asia Pacific trade in services is expected to be
much slower and protracted than for merchandise exports, owing to
ongoing new COVID-19 waves that have hit many Asia Pacific
economies during second quarter 2021. International travel
restrictions are still expected to remain a major impediment to the
recovery of international tourism and business travel for many
economies in the Asia Pacific region during 2021. The re-opening of
international travel is expected to be more selective in the Asia
Pacific region, on a bilateral basis between countries that have
implemented widespread vaccination programs.
The path of Asia Pacific export recovery is therefore likely to
be uneven across different industry sectors, with manufacturing and
commodities exports leading the recovery, while some service sector
exports such as the tourism and commercial aviation sectors are
expected to have more gradual recovery paths.
Asia Pacific electronics sector exports
rebound
The electronics manufacturing industry is an important part of
the manufacturing export sector for many Asia Pacific economies,
including mainland China, Japan, South Korea, Malaysia, Singapore,
the Philippines, Taiwan, Thailand, and Vietnam. Furthermore, the
electronics supply chain is highly integrated across different
economies, with mainland China being an important supplier of
intermediate electronics parts for a number of Southeast Asian
electronics sectors.
Despite severe disruptions to Asian electronics production and
to global demand owing to the pandemic during the first half of
2020, the IHS Markit Global Electronics PMI has signalled a very
significant rebound since mid-2020. The latest IHS Markit Global
Electronics Purchasing Managers' Index for May 2021 reached the
highest level recorded in 23 years, boosted by buoyant demand in
key markets. Rebounding consumer spending and industrial production
in key economies, notably the United States, mainland China, the
European Union, and the United Kingdom, is helping to drive demand
for a wide range of electronics products.
The IHS Markit Global Electronics PMI new orders index rose from
a low of 35.0 in May 2020 to a level of 61.9 in April 2021, rising
further to 63.3 in May 2021. New orders in May showed the fastest
pace of expansion since May 2004 and were the fourth-fastest pace
of expansion since the survey series began 23 years ago.
The South Korean Ministry of Trade, Industry and Energy
announced that South Korea's total exports rose at a very rapid
pace of 45.6% y/y in May, following an increase of 41% y/y in
April. Exports of semiconductors rose by 24.5% y/y in May, the 11th
consecutive month of expansion. Semiconductors exports have been
helped by stronger global demand for memory chips for mobile phones
and for data centres. Memory chip prices have been rising owing to
the prolonged global supply shortage.
Singapore's domestically manufactured electronics exports rose
by 10.9% y/y in April, after expanding at a pace of 24.4% y/y in
March 2021. In April, electronics exports to the European Union
were up 8.5% y/y, while electronics exports to South Korea were up
by 13% y/y.
In Vietnam, exports of computers, electrical equipment and parts
rose by 31% y/y in the first quarter of 2021, as global demand for
computer equipment surged owing to the pandemic and the shift
towards remote working by workers worldwide. Exports of these
products to the United States were buoyant, rising by 46% y/y,
while exports to the European Union rose by 39% y/y. Exports of
mobile phones and other telephone equipment soared by 12% y/y, with
exports of mobile phones and components to China rising by 63%
y/y.
In Malaysia, exports of electrical and electronic products,
which accounted for 34.8% of total merchandise exports, have been
extremely strong, up 42% y/y in April, after rising by 47% y/y in
March.
Asia Pacific supply chain and shipping
disruptions
The strong growth in Asian exports to the United States and
Western Europe during the first half of 2021 has created
bottlenecks for shipping owing to shortages of containers,
resulting in soaring freight rates on key Asian routes. Average
Asia-US East Coast container freight rates on short-term contracts
are up 56% from May 2020. The problems for the shipping industry
have been further compounded by port congestion in Southern Chinese
ports, reflecting major shipping delays at Yantian port since late
May 2021 owing to the impact of stringent health measures as a
result of a COVID-19 cluster outbreak. Yantian International
Container Terminal is one of China's largest container ports. With
peak shipping season looming for Christmas retail orders from the
United States and Europe, shipping bottlenecks and freight rates in
Asia are likely to stay at elevated levels during the third quarter
of 2021.
Indian ports also faced disruption during May 2021 owing to the
impact of the large new COVID-19 wave that hit the nation,
resulting in some temporary port closures as well as delays to
shipments because of health safety measures.
In the electronics industry, the strength of global electronics
demand is continuing to exacerbate semiconductors shortages for
some manufacturing industries, notably the global automotive
sector. Supply chain disruptions to semiconductors production have
also impacted on the situation. The new COVID-19 wave in Taiwan has
increased risks of potential supply chain disruptions at
semiconductors plants impacted by Covid clusters. Meanwhile the
latest IHS Markit Global Electronics PMI survey shows evidence of
sharp increases in electronics industry input prices as well as
output prices, mainly reflecting shortages of essential raw
materials.
Asia Pacific trade outlook
The central case global economic scenario for 2021 is positive,
with the world economy forecast to show improving momentum through
the course of 2021 as COVID-19 vaccination programmes are rolled
out. Many of the world's largest economies, including the United
States, the European Union, the United Kingdom, and China, have
been rapidly progressing with vaccination programmes during the
first half of 2021. This has allowed domestic demand to strengthen
in these economies, with gradual easing of lockdown conditions in
markets in this grouping that are currently experiencing
significant new waves of COVID-19 cases. Consequently, this should
help to support the strong rebound in world merchandise exports
during 2021, which are forecast to grow at a pace of 14.7% y/y
following a severe contraction of 7.5% y/y in 2020.
With many of the East Asian economies, such as China, Japan, and
South Korea, having large manufacturing export sectors, the upturn
in electronics exports is helping to underpin the rebound of
manufacturing exports. This is also supporting demand for
industrial raw materials from Asia Pacific commodity-exporting
nations such as Australia and Indonesia.
However, the recovery of Asia Pacific trade in services is
expected to be delayed and protracted, as international travel
restrictions continue to constrain any early recovery in exports of
tourism and commercial aviation, which are an important component
of total services exports for many Asia Pacific economies.
Over the medium-term outlook, Asia Pacific exports are expected
to grow at a rapid pace, helped by the sustained strong growth of
intra-regional trade within Asia Pacific, as China, India, and
ASEAN continue to be among the world's fastest-growing emerging
markets.
The rapid growth of Asia Pacific exports is also expected to be
strengthened by the regional trade liberalisation architecture. A
wide range of bilateral and multilateral trade liberalisation
initiatives have either been implemented or are planned in Asia
Pacific. This includes the large recent Comprehensive and
Progressive Agreement for Trans-Pacific Partnership (CPTPP) and
Regional Comprehensive Economic Partnership (RCEP) multilateral
trade agreements and an increasing number of major bilateral free
trade agreements (FTAs) such as the recent EU-Vietnam FTA and the
Indonesia-Australia Comprehensive Economic Partnership
Agreement.
However, regional geopolitical tensions do pose risks to
bilateral trade development among some Asia Pacific nations. The
recent China-India border clash has impacted bilateral trade and
investment flows, while the China-Australia trade war has hit
Australian exports of a wide range of commodities to China.
Nevertheless, the long-term outlook for Asia Pacific trade growth
remains very positive, boosted by the continued rapid long-term
growth forecast for the Asia Pacific region over the next
decade.
Rajiv Biswas, Asia Pacific Chief Economist, IHS
Markit
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.