News Update HSBC sees PHL recovering from trade slump by 2012

British banking giant Hong Kong & Shanghai Banking Corp. (HSBC) sees the Philippines' merchandise trade expanding by 4.8 percent this year and 6.3 percent next year with exports expected to recover over the next few years. Junie Veloso, HSBC senior vice president and head of corporate banking, said in a press conference Tuesday that exports will recover in 2012 and this trend would continue in the near-term after slowing down significantly this year. "Most of its growth in trade will be generated over the next two years when annualized growth is predicted to be at between 4.8 percent and 6.33 percent. It is anticipated the country’s share of world trade will decrease to 0.3 percent in 2025 reflecting the highly competitive nature of the sectors in which it exports," Veloso stressed. He pointed out that the country's core export sectors are in electronic integrated circuits, computer diodes and components for office machinery, which are an integral part of supply chains and are managed through Asian channels. "It is highly vulnerable to fluctuations in demand globally since many of its exports depend on buoyant consumer demand for the end-products manufactured elsewhere," he added. According to him, HSBC sees the merchandise trade of the Philippines growing by 56.6 percent to $162.1 billion in 2025 from $103.5 billion in 2010 with trade volumes expected to grow by 87 percent over the next 15 years. On the other hand, world trade is expected to grow by 73 percent to $43.6 trillion in 2025 from $27.2 trillion last year. "The Trade Forecast is predicting its trade to grow further over the period to 2025 and at an annualized rate than is faster than for the world as a whole, especially in the near-term," Veloso explained. He said the Philippines operates in a highly competitive segment of global markets supplying intermediate products in consumer electronics that feed into the global supply chain. He added that the country has a vital role in the corridors that are emerging in Asia with China, Korea, Thailand and Singapore as key trade partners. HSBC said the largest trading partners of the Philippines are China, Singapore, Japan, Korea and Thailand. According to him, China is expected to emerge as the country's largest trading partner by 2025 from third place now. "Its strongest export sectors are integrated circuitry, computer diodes and office machinery components, while for imports, it is integrated circuitry and oil. Trade with China is starting to dominate the growth sectors for the Philippines," he said. Veloso explained that exports of agriculture commodities to China would grow by 10.72 percent per year while shipments of textiles would expand by 8.9 percent by 2025 and imports of electronic components, including integrated circuitry from China, are set to grow by 6.34 percent. Government reports suggest that trade in electrical goods fell by 9.4 percent in June 2011 alone and this illustrates both the dependency of the export sector and the economic vulnerability to trends elsewhere in the world. — ELR, VS