(Finbarr Bermingham – Global Trade Review)
A Q&A with the International Monetary Fund’s chief of regional studies for Asia Pacific, Rachel van Elkan
GTR: We’ve been disappointed by the general trade and export data in Asia over recent months. What’s your outlook for this, are you expecting things to pick up?
It’s worth thinking about why export growth has slowed. Much of the data we have so far is in value terms. One of the obvious reasons for the slowdown is the declining commodity prices and changes in exchange rates. Even for countries that are not commodity exporters, it’s likely that weaker oil prices, especially crude, have filtered through to product prices. And also where partner countries are using currencies other than the dollar, such as the yen or the euro or other currencies, it’s not surprising to see that in dollar value terms there’s been some weakness given the respective differences in currency value.
That’s far from the whole story though. It’s quite clear that even though in advanced economies growth is picking up a bit, growth is still not where it might be. The US continues to disappoint, the euro area is getting stronger, and we expect Japan to do better this year relative to last, that’s also a factor. But advanced countries remain the main final demanders. That’s also part of the story and is dragging on Asia.
Those are more cyclical or temporary stories, but I think there’s also some evidence of longer-term persistent structural changes. I have in mind the changes within the supply chain, the global value chain in which Asia is very much involved. There’s some evidence that China in particular is becoming less reliant on imported intermediate goods from other Asian countries. That would likely have a more persistent effect on trade. Click here to read more.