Archive for July 2011

The US debt crisis and Asia

July 29, 2011

Only four days left and the US Treasury will have insufficient fund to pay its maturing loans, unless Congress will raise the debt limit, so that the US government can borrow more to pay its maturing debt obligations.

Although the bulk of the US federal debt of $14.270 as of end-March 2011 were from US individuals, corporations and government accounts, more than $2 trillion of it are from Asian governments and central banks (in $ billion): China 1,152, Japan 907, Taiwan 154, Hong Kong 122, Thailand 61, Singapore 60.

A debt default, even temporarily, is bad signal for US government creditors, including Asian governments and central banks. It would imply that US promises and written contracts can be unreliable. Future US government deals, from trade to security and other sectors will be adversely affected.

US debt crisis and the Philippines

July 28, 2011

On August 2 or just five days from today, the US federal government’s debt ceiling of $14.3 trillion will be breached. US government debt are so huge that they also pay a lot both in principal and interest payment. If Congress will not pass a law that will increase the debt ceiling by August 2, the US government will not have enough money to pay some of its debt. The result is a debt default, a bad scenario coming from the world’s biggest economy, or the world’s biggest government.

The implication for the Philippines and other small developing economies is not direct. The Philippine government and corporations are not big creditors to the US government; China’s are. But the effect is indirect. The cost of credit and new borrowings will rise due to this huge economic uncertainty. Since the Philippine government is a net borrower every year because  of its own budget deficit every year and a high public debt, then the cost of Philippine borrowings will rise. We shall be watching this development.

Top 10 sources of Philippine Imports, Jan-May 2011

July 27, 2011

In US$ billion; 2nd column is percentage share:

  Total Imports      25,997.46   100.00 
1. USA            2,993.79    11.5 
2. Japan           2,577.48     9.9
3. Singapore    2,385.44     9.2
4. China           2,382.27     9.2
5. S. Korea      2,058.54     7.9
6. Taiwan         2,027.12     7.8
7. Thailand       1,565.35     6.0   
8. Saudi Arabia  1,120.64     4.3   
9. Malaysia       1,241.02     4.8  
10. Indonesia       996.04     3.8 
   Others           6,649.78    25.6
source: NSO, http://www.census.gov.ph/data/sectordata/2011/im110503.htm

The recent earthquake-tsunami in Japan must have affected its exports to the Philippines
and other countries.

Top 10 Philippine exports market, Jan-May 2011

July 19, 2011

In US$ billion; 2nd column is percentage share.

Total Exports:              20,625.27  100.0 

1. Japan       3,358.48   16.3

2. USA        3,095.96   15.0

3. China    2,383.00   11.6

4. Singapore        2,196.52   10.6

5. Hong Kong      1,754.44    8.5

6 S. Korea             965.28    4.7

7. Taiwan           924.23    4.5

8. Thailand          870.71    4.2

9. Germany         774.42    3.8

10. Netherlands         804.42    3.9

Others                   3,497.80   17.0

source: NSO, http://www.census.gov.ph/data/sectordata/2011/ex110503.htm

In 2010, Singapore was the 3rd biggest exports market of the Philippines and China was 4th. This year, they changed placed. Also last year, Germany and Netherlands were no. 6th and 7th respectively, early this year they are no. 9th and 10th respectively.

Major Philippine Import Products, 2010

July 18, 2011

In US$ billion and percentage share:

Total        54,932.92    100.0%

1. Electronic products 18,550.00   33.8%

2.Mineral fuels, lubricants, related materials  9,588.62      17.5%

3. Transport equipment   3,475.24   6.3%

4. Industrial machinery & equipment   2,510.52   4.6%

5. Cereals & cereal preparations   2,224.68      4.0%

6. Organic & inorganic chemicals   1,377.102.5%

7. Metaliferous Ores & metal scrap   1,238.61      2.3%

Others 15,968.15        29.1%

source: NSO, http://www.census.gov.ph/data/sectordata/2010/sr1159903.htm

Unlike Philippine exports which are dominated by just one commodity, electronic products, the country’s imports are dominated by two products: electronics, and mineral fuels & related materials, constituting 51 percent of total imports.

If we subtract imports from exports of electronic products, the estimated local value added in 2010 was around $12.5 billion. A good number somehow.

 

 

Major Philippine Export Products, 2010

July 17, 2011

Units in US$ billion, percentage share:

Total Exports   51,497.51     100.0% 

1. Electronic Products 31,079.54    60.4%

2. Apparel & Clothing   Accessories 1,701.49     3.3%

3. Coconut oil   1,265.72   2.5%

4. Woodcrafts and furniture   1,181.01  2.3%

Others      16,269.75     31.6%

source: NSO,  http://www.census.gov.ph/data/sectordata/2010/sr1159902.htm

So, 60 percent or $3 out of $5 of total merchandise exports revenues of the Philippines last year were accounted for by electronics exports. This is a very lopsided dependence. The good thing here is that global demand for electronic products can only increase, never decrease, as the world is becoming more integrated via endless development and innovations in the information and communications technology (ICT).

Top 10 Philippine import sources, 2010

July 16, 2011

Units in US$ billion, and percentage share:

TOTAL IMPORTS (2010) 54,932.92    100.0

1. Japan   6,744.36      12.3

2. USA   5,886.66      10.7

3. Singapore   5,187.00        9.4

4. China   4,627.56        8.4

5. S. Korea   3,832.94        7.0

6. Thailand   3,870.78        7.0

7. Taiwan   3,675.90        6.7

8. Malaysia   2,514.66        4.6

9. Saudi Arabia   2,406.90        4.4

10. Indonesia   2,294.93        4.2

* Viet nam   1,607.68        2.9

Others 12,283.55      22.4

source: NSO, www.census.gov.ph

There is a diversified sources of Philippine imports, and this too, is a good thing. Any economic or natural calamity in one country will not affect much the Philippines as the country’s importers can possibly source their needs from other countries. The combined share of the top 5 import sources was only 47.8 percent, less than half of total imports. Up to 10 years ago or more, this ratio would perhaps be around 60 percent or higher.