Moody’s: PH faces lower China export pressure
The Philippines is among the least vulnerable Association of Southeast Asian Nations (Asean) economies to mounting competitive pressures from Chinese exports, with most local manufacturing sectors facing only low to moderate displacement risks, Moody’s Ratings said.
In its latest report, the credit rating agency said the Philippines has the second-largest share of low-risk manufacturing sectors among the Asean-5 economies.
The risks stem from China’s export redirection, which Moody’s said is intensifying import competition and price compression across Southeast Asia.
“The ASEAN-5, long a beneficiary of China’s growth and supply-chain integration, has navigated earlier trade frictions largely from the sidelines,” Moody’s said.
“But this positioning is becoming harder to sustain as Chinese export pressures broaden across sectors, increasing risks to operating performance for affected manufacturers in the next 5-10 years,” it added.
Still, the Philippines is one of two economies that emerged as the most insulated in the region.
Sectors assessed to be at low risk include food, beverages and tobacco, wood products, rubber and plastics and nonmetallic mineral products.
Electrical and optical equipment—the country’s largest manufacturing export segment—was classified as low-to-medium risk.
Meanwhile, textiles and apparel, chemicals, machinery, pharmaceuticals and motor vehicles were placed in the medium-risk category. Higher-risk sectors were limited to coke and refined petroleum products, basic and fabricated metals and other manufacturing segments.
However, Moody’s noted that these industries account for only a small portion of the country’s manufacturing base.
“Higher-risk readings are concentrated in coke & refined petroleum and basic & fabricated metals, which account for a relatively small share of total output,” the agency said.
“Lower aggregate vulnerability reflects more contained direct trade exposure to China rather than broad-based industrial competitiveness,” it added.
But despite the country’s relatively favorable position, Moody’s warned that competition with Chinese manufacturers is intensifying as industrial bases across the region increasingly overlap.
The report showed that more than half of Philippine exports overlap with Chinese exports. Electrical and optical equipment accounted for the largest overlap at 29 percent, followed by machinery and other products at 9 percent each.
Other export categories, including textiles, chemicals, motor vehicles and basic and fabricated materials, also overlap with Chinese exports, albeit to a lesser extent.
According to Moody’s, electrical and optical equipment and machinery face some of the highest displacement risks across the region because of intense competition from Chinese producers.
Still, the agency said strong export potential in electrical and optical equipment partly offsets these risks for the Philippines, as well as Malaysia and Vietnam.
