By Jenina P. Ibañez, Senior Reporter
AN ECONOMIC SLOWDOWN in China could dampen trade inputs to Philippine manufacturing, prompting the need to further diversify the country’s trade partners, economists said.
“What we need from them are production inputs. If they slow down in producing inputs that we need, there might be a spillover effect on us,” Ser Percival K. Peña-Reyes, associate director at the Ateneo de Manila University Center for Economic Research and Development, said in an interview by telephone.
Effects may be seen in imports for various manufacturing and food production sectors, he said.
China’s gross domestic product expanded by 8.1% last year, exceeding its government’s growth target of 6%.
Production has so far been growing — industrial output rose by 4.3% in December, stronger than the 3.8% year-on-year increase a month earlier.
But China’s economic growth is widely expected to slow down in 2022 amid the threat of the Omicron variant to business operations. Goldman Sachs reduced its China growth forecast to 4.3% from 4.8%, while the International Monetary Fund lowered its projection to 4.8% from 5.6%.
“Because China is one of the major trading partners of the Philippines and our economy has huge exposure with respect to their economy, any growth increase or slowdown will have an impact on us especially on their trade commitments and development assistance given to us particularly on infrastructure development,” Asian Institute of Management economist John Paolo R. Rivera said in a Viber message.
But China is only one of many Philippine trading partners, he added.
“That’s why it’s important to diversify and forge cooperation with other countries whom we can generate mutual benefits because we are in an integrated world economy,” Mr. Rivera said.
China was the Philippines’ biggest source of imports in the first 11 months of last year as it shipped $24.6 billion worth of goods into the country, government data showed.
Meanwhile, China was the second-biggest export destination, receiving $10.6 billion in goods from the Philippines in the same period.
So far, exporters are optimistic about trade with China this year.
Philexport President Sergio R. Ortiz-Luis, Jr. said in a mobile message that the Regional Comprehensive Economic Partnership (RCEP), a regional trade pact, would support the trade relationship between the two economies, especially in services exports in information technology, healthcare, and outsourcing.
“In terms of products, major China imports (from the Philippines) are electronics and parts, marine and agriculture products, which have been identified as among the products that showed export growth last year,” he said.
The RCEP was ratified by President Rodrigo R. Duterte on Sept. 2, 2021, and is now pending in the Senate for its concurrence. The Senate only has until Feb. 4 to tackle the RCEP, before lawmakers go on a break for the election campaign.
In a separate statement, Department of Trade and Industry (DTI) said the RCEP will support ongoing economic reforms that would drive recovery.
DTI said the country’s participation in RCEP, together with legislative reforms will strengthen efforts to improve the business environment. These include the amendments to the Retail Trade Liberalization Act, which has been signed into law, and the proposed amendments to the Public Service Act, which is still at the Bicameral Conference Committee level.
“By outlining the existing legal regime in the conduct of services trade and investment through Schedules of Specific Commitments and Reservation Lists of Parties, RCEP provides the assurance that the existing rules and disciplines in doing business in the country, including the allowed foreign equity participation (FEP) in various key sectors will not be changed arbitrarily,” DTI said.
“This will help encourage inflow of foreign investments, facilitates an opportunity to partner and form joint ventures within the region, and allows greater participation of more service providers in vital sectors of the country,” it added.
The RCEP has been in force in 11 countries since Jan. 1. — with inputs from Revin Mikhael D. Ochave