THE reopening of China will boost demand for electronics produced by suppliers in Southeast Asia, Moody’s Analytics said.
“While economies such as Vietnam primarily function as low-cost alternatives to China for the assembly of consumer goods, the case of Malaysia, the Philippines, and to a degree, Thailand is different. Exports of semiconductors and other electronic components increasingly make their way into final demand in China, and China’s growing consumer economy will accelerate this trend,” Moody’s Analytics said in a note on Tuesday.
Electronics and semiconductors, which are the Philippines’ top export, are expected to grow by 5% this year, according to the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI). SEIPI initially targeted 9% growth but lowered its target amid a looming global recession.
Last year, the value of electronics exports grew 6.88%, below the 10% target.
Moody’s Analytics said that Southeast Asia’s economies, which feature a mix of manufacturing and commodities-based industries, are “less tied to Chinese domestic demand than emerging heavyweights South Korea and Taiwan.”
“These countries’ semiconductor and intermediate electronics exports are more tightly linked to final demand in China, serving as key inputs into consumer and capital goods. But Southeast Asia’s growing specialization in semiconductors and other immediate electronic components will bind it tighter to China,” it added.
China’s reopening is also expected to boost tourism, business travel, and demand for commodities.
“There are a lot of challenges for Southeast Asia, from elevated inflation to higher interest rates and consumer fatigue. But the quadruple-boost from China’s reopening — which will support tourism, investment, commodity prices and trade — will power the recovery as inflation gradually recedes,” it added.
ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a Viber message that the China reopening will benefit the region in terms of trade and tourism.
“Remains to be seen however to what extent we will see China reopen and recover. China recently set a disappointingly low growth aspiration showing that even government officials remain guarded in their estimation on how quickly China’s economy can get back up to speed,” he added. — Luisa Maria Jacinta C. Jocson