Despite worries of a slowing US economy and an increasingly strong peso, the Philippine National Economic and Development Authority (NEDA) recently reported that exports jumped 21.4% for the month of December. These numbers have served as counterbalance to reports of weak exports in 2007 and worries about 2008, causing many economists to forecast a brighter outlook for the economy.
While many segments of the export market witnessed record growth last year, exports as a whole managed to grow only 6.1%, reaching $50.3bn, according to local press. This fell short of the government's original growth target of 11.0%, NEDA said in a statement on February 12. It was also significantly lower than the 15% growth seen in 2006.
Analysts blame this underperformance on the dramatic appreciation of the Philippine peso, which rose nearly 19% in 2007. While this trend has stabilised inflation and the cost of key imports such as fuel, it has hurt Filipino manufacturers by increasing the cost of their goods on the international market.
Due to these worries, as well as concerns over a slowdown in the US economy, many analysts had expected December's export numbers to follow the 2.1% drop seen in November.
Instead, the end-of-year rebound, which was driven by a 12.3% increase in exports of electronics and strong performances across the mining, agricultural and manufacturing sectors, has caused many analysts to rethink the importance they had previously placed on the US export market.
In an interview with local press, Myrna Asuncion, NEDA director for policy and planning, said waning demand in the US could be offset by growing demand throughout the region. "The expected US recession could adversely affect our exports. But if demand for electronics in Asian countries remains high, then the impact [of a US recession] would not be as bad."
With wages increasing across Southeast Asia and growing demand from China, such optimism seems justified. While Chinese-Filipino trade has consistently grown over the past several decades, there remains significant room for expansion, according to Liang Wentao, China's Economic and Commercial Counsellor in Manila.
"The frequent exchanges of high-level visits by the leaders of both countries has greatly promoted the comprehensive cooperation between the two sides in almost every field," Wentao noted. Chinese Premier Wen Jiabao visited the Philippines in early 2007, while Philippine President Gloria Macapagal-Arroyo visited China four times last year alone.
Among the products that should benefit most from improved Chinese-Filipino trade relations are electronics, which currently make up 80% of Filipino exports to China. These goods could see growing demand from China's emerging middle class. Tourism, itself an "export industry", is also set to benefit from ever closer links with China.
Mining exports could pose the greatest opportunity however. The combination of recent Filipino reforms to attract further investment to the sector, high prices for raw materials and the ongoing Chinese construction boom could combine to vault the mining industry into a key growth driver in 2008. Early numbers from 2007 indicate that this trend has already begun.
The mining sector exported $2.1bn worth of gold, nickel, copper and silver last year, up 61% from $1.3bn in 2006. According to the Chamber of Mines, $1bn in foreign investments is expected this year alone, a trend that many analysts believe will gain pace in the coming years. The Department of Environment and Natural Resources estimates that around 30% of the Philippines total land surface - or 9m ha - has high potential for rich mineral deposits, of which only 2% has been explored.
Other promising areas include industrial goods, agricultural products and energy supplies, all of which have been buoyed by high global prices and increasing demand. This diversity is exactly the reason why many analysts, as well as the government, which has targeted 8% growth in exports, are optimistic for 2008.
The growing consensus is that while some industries may slow due to decreasing demand from the US, the nation's diverse export markets and varied basket of goods will ensure growth and ultimately maintain domestic consumption. For the Philippines, and the region as a whole, this will be the test of 2008.