ADB: PH at risk from China slowdown

March 17, 2016 9:18 pm

The Philippines will experience the “hardest hit” among the Southeast Asian countries if the economic slowdown in China continues over the next five years, a working paper released by the research arm of Manila-based multilateral lender Asian Development Bank (ADB) on Thursday revealed.

Titled “Impact of the People’s Republic of China’s Growth Slowdown on Emerging Asia: A General Equilibrium Analysis,” the study from Asian Development Bank Institute (ADBI) said the Philippines along with Malaysia will be the most affected in the region by the economic slump in China.

“In Southeast Asia, the Philippines and Malaysia would be hardest hit, with GDP [gross domestic product] growth slowing down by more than 0.40 percentage points due to their strong trade linkages with the PRC [People’s Republic of China],” the ADBI said.

The think tank noted that the average GDP growth rate of developing Asia as a whole, excluding China, would decelerate by 0.26 percentage points in the coming five years because of China’s slowdown.

For the Philippines alone, the economy will experience a drop of 0.47 percent in its GDP growth between 2016 and 2020, ADBI claimed.

“The economies with closer trade linkages to the PRC would suffer more export deceleration. The PRC’s slowdown would dampen the exports growth of the Philippines,” it said.

The bank explained that the extent of the impact on economic growth would also depend on the magnitude of the Keynesian demand multiplier in individual economies.

The Keynesian multiplier is the rate at which changes in the exogenous demands are magnified into changes in the overall level of income. The economies with higher propensities to consume tend to have larger multipliers.

“This explains why the Philippines and other South Asia [economies] would suffer relatively large output adjustments although the reduction in their trade balances as ratios to GDP would be smaller,” the working paper said.

The ADBI, however, said that if the United States rebounded during the period, it would offset the negative impact from China to 0.17 percentage points.

“The growth deceleration of the Republic of Korea and Southeast Asian economies would range from 0.09 percentage points in Thailand and Viet Nam to 0.17 percentage points in the Philippines,” it said.

“The growth pickup in the US would almost fully offset the negative impact from the PRC for South Asia, whose growth would decelerate by a minimal 0.03 percentage points,” it added.

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