Asia's export outlook: Going slow


The outlook in Asia for exports, one of the key swing factors for the region's broader economy, remains uncertain, economists say.

Asia's export engine took a hit in the wake of the 2008 financial crisis, which hurt economic growth and demand from key markets the U.S. and Europe. The recovery from that period remains slow, according to analysts.

Container ship in Victoria Harbor of Hong Kong.
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"The overall export trend has been subdued since the financial crisis," said Derrick Kam, from Morgan Stanley's Asia-ex Japan economics team.

"First quarter export growth in Asia was particularly weak, down 1.8 percent year-on-year compared with a 6.1 percent rise in the fourth quarter of 2013 and a 4.1 percent gain in the third quarter," he added.

Kam said the recent weakness was mostly driven by weaker export growth to the U.S., the world's largest economy, and slower intra-regional trade.

Analysts say that some signs of a recovery in Asian exports emerged in April – for instance China's exports grew for the first time in two months. But they add that data in coming months such as export numbers from South Korea need to be watched carefully.

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Asia includes many economies still heavily dependent on exports for their growth such as China, South Korea and Taiwan. Exports from the Asian manufacturing hub are viewed by many economists as a bellwether of the global economy.

Glen Levine, a senior economist at Moody's Analytics in Sydney, said Asia's export-focused economies remain vulnerable to a change in global conditions, especially if the U.S. stumbles.

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"The outlook for the U.S. and Europe is a concern for Asia's export‐facing economies," he said in a note published Wednesday.

"Europe's economy disappointed in the opening quarter and its prospects remain perpetually bleak. The U.S. also underperformed, partly because of weather but also because of a housing slowdown that could become more permanent. If so, it would weigh on U.S. consumption demand and in turn on Asian production," he added.

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Data earlier this month showed that the euro zone's economic recovery remains stubbornly slow with first -quarter gross domestic product rising by a disappointing 0.2 percent from the previous quarter.

Against a backdrop of sluggish growth and low inflation, the European Central Bank is expected to cut interest rates when it meets next in June.

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Worries about a weakening U.S. economy meanwhile have helped drive Treasury yields down in recent weeks, although Tuesday saw the release of stronger economic numbers – better consumer confidence, stronger durable goods and improving home prices.

"Production in Taiwan and Korea is particularly sensitive to a U.S. downturn, the former through mobile phones and other high‐tech consumer goods, and the latter via autos and household appliances," said Levine.

"Singapore and Thailand are also exposed, although this may be via indirect effects from the downturn in other markets such as Japan," he said.

Data on Wednesday showed Thai exports, which make up more than 60 percent of the country's gross domestic product, fell 0.9 percent in April from a year earlier as a political crisis continued to take its toll on the economy.