A slowdown in global trade and weak demand for Philippine exports will combine to dampen shipping volumes to and from the Philippines, which could be aggravated by problems in the international container-line industry triggered by the collapse of South Korean giant Hanjin Shipping Co. Ltd.
The Asian Development Bank said in its Asian Development Outlook Update that among the threats to sustained economic growth for the Philippines this year would be weaker-than-expected demand from major markets for Philippine exports.
ADB raised the forecasts for the gross domestic product growth this year to 6.4 percent from its March projection of six percent. But for 2017, growth is seen to dip slightly to 6.2 percent although still above the previous forecast of 6.1 percent.
The World Trade Organization also reduced its global trade forecast, warning that anti-globalization rhetoric and Brexit were pushing trade growth to its slowest pace since Britain’s financial crisis.
The WTO said global trade was now estimated to expand by just 1.7 percent this year, compared wit its April projection of 2.8 percent. The new figure is a far cry from the year-ago growth projection of 3.9 percent.
The WTO said growth in trade had fallen to its slowest pace in around seven years when the global financial crisis hit.
It warned that “creeping protectionism,” coupled with lacking trade liberalization and perhaps the growing role of the digital economy and e-commerce might help explain the recent declining ratio of trade growth to GDP growth.
Think tank Economic Intelligence Unit said the fall of Hanjin Shipping, the world’s seventh largest container line, was an evident sign that the industry had hit a crisis point, and a massive transition would be needed to turn profitability around.
The Hanjin Shipping debacle for now has little effect on the country’s trade since local exporters said they do not extensively use Hanjin vessels. But a study by SeaIntel cited by the EIU report showed an instant capacity reduction of six to eight percent on trans-Pacific trade and a five to six percent reduction on the Asia-Europe trade as a result of the debacle.
“Hanjin also has major stakes in the ports of Busan and Osaka, which will most likely see high-capacity disruptions, and impaired profitability, as these ports will lose ship calls from Hanjin,” according to the EIU report.
It added ports had also denied access to Hanjin vessels, amid fears the company would not be able to pay the fees to dock and store its containers, leaving most of Hanjin’s ships stranded at sea.
The company’s financial woes can be traced back to the financial crisis in 2008, which severely hampered global growth and trade and had a knock-on effect on the shipping industry, which lost an estimated $15 billion, the report said.