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With world GDP forecast to rebound to positive growth of 4.4%
y/y in 2021 after a contraction of 4.0% y/y in 2020, this is
expected to provide a boost to the export sectors of many
export-driven Asia-Pacific (APAC) economies. The rebound in
economic growth in advanced economies such as the US, EU, UK and
Canada linked to the rapid rollout of vaccination programs during
the first half of 2021 is expected to support improving APAC 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. APAC
merchandise exports are forecast to show a strong rebound of 9.4%
y/y in 2021, after contracting by 3% y/y in 2020. IHS Markit
estimate that global trade volume contracted by -11.2% in 2020. A
recovery is forecast in 2021 and 2022, with global trade volume to
recover by 7.5% and 4.1%, respectively.
However international travel restrictions are still expected to
remain a major impediment to the recovery of international tourism
and travel in the APAC region during 2021. This is expected to
result in a more protracted and gradual recovery path for trade in
services for many APAC economies.
Recovery in APAC exports
The Asia-Pacific (APAC) region experienced a severe recession in
2020 due to the COVID-19 pandemic, with APAC GDP contracting by an
estimated 1.5% year-on-year (y/y). Pandemic-related lockdowns and
travel bans had a severe negative impact on the economies of most
APAC nations during the first half of 2020. However, during the
second half of 2020, many Asia-Pacific economies had shown a
significant recovery 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 APAC GDP
growth forecast at 5.7% 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 APAC
economies.
A key factor underpinning the strong economic rebound in the
APAC region is expected to be buoyant economic growth in China,
which is forecast to grow at 7.5% y/y in 2021. The Asia-Pacific
recovery is expected to be broad-based, with most major
Asia-Pacific economies forecast to show rapid growth in 2021.
The improving economic momentum in the APAC region has been
reflected by IHS Markit's APAC PMI survey index of manufacturing
output, which has recovered strongly in recent months. The index
has signaled the most robust expansion of production in a decade
during the closing months of 2020, albeit with the rate of
expansion cooling slightly in December 2020, though this was in
part due to shipping delays caused by the sheer strength of
demand.
The export rebound has been reflected in recent trade data from
many APAC economies. For mainland China, merchandise exports rose
by 18.1% y/y in December 2020, following a 21.1% y/y growth rate in
November. South Korea's exports have also rebounded, rising by
12.6% y/y in December 2020. Taiwan's exports rose by 12% y/y in
December, the sixth consecutive month of positive export growth,
buoyed by a 22.2% y/y rise in exports of electronics.
In the ASEAN region, Singapore's non-oil domestic merchandise
exports have also shown an upturn, rising by 6.8% y/y in December,
helped by a 13.7% y/y rise in electronics exports. Vietnam's
merchandise exports showed buoyant growth in December, rising by
22.7% y/y, helped by rapid growth of 24.1% y/y for exports of
computers and electrical equipment.
The recovery of APAC trade in services is expected to be much
slower and protracted than for merchandise exports. 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 APAC region during 2021. The re-opening of
international travel is expected to be more selective in the APAC
region, on a bilateral basis between countries that have
implemented widespread vaccination programs.
The path of APAC 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.
APAC electronics sector exports rebound
The electronics manufacturing industry is an important part of
the manufacturing export sector for many ASEAN economies, including
Malaysia, Singapore, Philippines, Thailand and Vietnam.
Furthermore, the electronics supply chain is highly integrated
across different economies, with 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 due to the pandemic during the first half of 2020,
the IHS Markit Global Electronics PMI has signaled a rebound since
mid-2020. The global electronics PMI new orders index rose from a
calendar year-to-date low of 35.0 in May to a level of 54.3 by
December, reflecting a significant recovery in new orders. The
electronics sector rebound is making an important contribution to
the recovery of manufacturing exports and industrial production in
many ASEAN industrial economies.
This rebound in global electronics demand has been reflected in
Singapore's electronics manufacturing exports. Singapore's domestic
electronics exports rose by 13.7% y/y in December 2020, with
electronics exports to the US up 20.4% y/y while exports to the EU
rose by 17.5% y/y.
In Vietnam, exports of computers, electrical equipment and parts
rose by 24.4% y/y in the eleven months to November 2020, as global
demand for computer equipment surged due to the pandemic and the
shift towards remote working by workers worldwide.
In Malaysia, exports of electrical and electronic products,
which accounted for 40% of total merchandise exports, were up 23.6%
y/y in November 2020. Malaysia's exports of electrical and
electronic products to the rest of ASEAN rose by 36.6% y/y.
The Ministry of Trade, Industry and Energy announce that Korea's
November exports of information and communications technology (ICT)
goods amounted to USD 16.6 billion, up 15.8% compared to the same
period last year.
APAC 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 programs are rolled out.
Many of the world's largest economies, including the US, EU, Japan,
China and India, are expected to be rapidly progressing with
vaccination programs during the first half of 2021. This should
allow domestic demand to strengthen in these nations, with gradual
easing of lockdown conditions in countries 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 11.3% y/y following a severe contraction of 9.2% 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 global trade will help to support the rebound of manufacturing
exports. This will also support demand for industrial raw materials
from APAC commodity-exporting nations such as Australia and
Indonesia.
However, the recovery of APAC 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 APAC economies.
Over the medium-term outlook, APAC exports are expected to grow
at a rapid pace, helped by the sustained strong growth of
intra-regional trade within APAC, as China, India and ASEAN
continue to be among the world's fastest-growing emerging
markets.
The rapid growth of APAC exports is also expected to be
strengthened by the regional trade liberalization architecture. A
wide range of bilateral and multilateral trade liberalization
initiatives have either been implemented or are planned in APAC.
This includes the large recent CPTPP and RCEP multilateral trade
agreements and an increasing number of major bilateral 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 between some APAC nations. The recent
China-India border clash has impacted on 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 APAC trade growth remains
very positive, boosted by the continued rapid long-term growth
forecast for the APAC 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.
