Southeast Asia's exports take a hit, and the decline in exports may worsen

Exports from Southeast Asia have started to take a hit from the economic challenges facing Europe, and have been falling since July.

Soaring inflation and energy costs and other economic fallout from the Russian-Ukrainian conflict could keep the European economy in a bind over the next 12 months, with consumers cutting back on spending.This is expected to have a significant impact on Southeast Asian exporters, especially textile manufacturing,This is the industry with the largest share of exports in several countries in the region.

A World Bank research report released last month warned that the global economy will gradually head toward recession next year, which could lead to a series of financial crises in emerging market and developing economies.

Brian Lee Shun Rong, an economist at Malaysia's largest financial services group Maybank, said:"The decline in exports (from Southeast Asia) will worsen further."

"Global growth is likely to cool further and recession risks are rising," he said. "The EU could slip into recession as it continues to face supply and cost-of-living shocks from the Russia-Ukraine conflict."

More precise trade data from Southeast Asia may be released later this year, but preliminary data shows that exports across the Southeast Asian continent have been falling since July.

Cambodia's textile exports, which account for more than half of the country's total exports in 2022, rose 37% year-on-year in the January-June period, but slowed to 19.9% ​​in July and just 2.7% in August.

According to data from the Cambodian General Administration of Customs,Cambodia's total exports in September fell 7.5 percent from a year earlier.

Ken Loo, secretary general of the Cambodia Garment Manufacturers Association, an industry body, said he believesCambodian exports to the European market will continue to decline in the fourth quarter of this year until 2023.

Vietnam's trade with the EU market surged 14.8 percent last year to .6 billion (64.4 billion euros), according to data reported by local Vietnamese media.But Vietnam's exports fell 14 percent between August and September this year, and many factories have shut down.

In the fourth quarter of this year and early 2023, Vietnam's monthly cargo export growth could slip to single digits or even turn negative, said Rong of Bank Malaysia.

According to UOB Research, the analytics arm of Singapore's United Overseas Bank (UOB), Malaysia's export growth appears robust at 26% in 2022, but is expected to decline to 1.3% in 2023.

Other major textile exporters Thailand and Myanmar also reported declines in exports to EU countries.

“Inflation in Europe and the looming recession are leading to a slowdown in exports from Southeast Asia,” said Yeo Lay Hwee, head of the European Union Center in Singapore. One of the four major trading partners of Southeast Asian countries.”

Compounding the problem, Loo of the Cambodia Garment Manufacturers Association said, many European buyers had a “stock glut” after a surge in trade in the early months of 2021 and a supply glut during the post-pandemic recovery.

However, business interests have expressed a relatively optimistic view of short-term trade between Europe and Southeast Asia.

European investment in the region rebounded strongly after reaching .5 billion in 2021, said Chris Humphrey, executive director of the EU-ASEAN Business Council. By the end of 2021, bilateral trade between Europe and the 10 ASEAN member states will almost return to pre-pandemic levels, when trade was worth 0 billion.

Humphrey said the trade contraction in the coming months was not unexpected, but "we remain confident in the future strong trade and investment relationship between the EU and ASEAN".

Companies should expect a slowdown in exports, not a collapse, said Trinh Nguyen, senior economist for Asia at French investment bank Natixis.

Nguyen added,Not all Southeast Asian markets will be affected equally, export-oriented economies such as Vietnam and Cambodia are expected to be more vulnerable to Western economic problems because of their high exports as a percentage of GDP. In addition, as the two main buyers of goods in Southeast Asia, the European and US markets may experience a slight economic downturn at the same time.