Data from Capital Economics, which compiles three-month rolling averages for emerging markets (EM) in order to smooth out monthly volatility, found that exports from EMs fell 8 per cent year on year in March, after a 4.4 per cent decline in February (see chart). Partial data available for April suggest EM exports continued to weaken in the month, the research company said
Several effects are conspiring to damp EM exports, including lower commodity prices, the strength of the US dollar and China’s slowdown, analysts said.
On a 12-month rolling basis, Capital Economics calculated, exports to China from Latin America are down 10 per cent year on year, while those from emerging Asia and emerging Europe are down 5 per cent and 3 per cent, respectively. Exports from Africa to China are down 7.5 per cent, it added.
“While commodity producers have been hit harder than most, manufacturing-based EMs have also suffered as China has slowed,” said Neil Shearing, chief emerging markets economist at Capital Economics.
“Manufacturers in Asia, including Korea and Thailand, have seen exports to China fall over the past year. And while around half of the drop in exports from Malaysia has been in commodities such as palm oil, manufactured exports, including computer parts, have also contributed to the decline,” Mr Shearing added.
All of this challenges the view that some economies might benefit as Beijing shifts its economic model from investment-led to consumption-led growth. China’s rebalancing towards consumer spending has so far failed to yield any export dividend, with Chinese
“The headwinds from China are likely to persist for some time,” Mr Shearing said.
None of the main EM regions is immune from the soft export trend, though emerging Asia has shown more resilience than the other regions, with emerging Europe suffering a slump driven by weak exports from Russia, Romania, the Czech Republic and Hungary.
The downturn in Europe — and in some other regions — is exacerbated by the strength of the US dollar, which pushes down the dollar value of exports priced in other currencies. Many emerging European exports, which are denominated in euro, have suffered valuation effects as the EU currency hit the skids.