Finance Secretary Benjamin E. Diokno admitted that China’s economic slowdown would have a minor impact on the Philippines.

At the ASEAN Roundtable in Marrakech, Morocco, the government’s chief economic manager said that China’s economic slowdown would have an impact on Philippine exports.

However, Diokno pointed out that the negative effects on exports could be partially mitigated by the strong demand from the substantial domestic market

“The Philippines is expected to be less affected by China’s slower economic growth given that the potential slowdown in exports could be partially mitigated by the demand from our large domestic market,” Diokno said.

In July, China ranked as the Philippines’ fourth largest export trading partner, accounting for 12.3 percent or $758.22 million of the total for that month.

Leading multilateral lenders, including the World Bank and the Asian Development Bank, forecast China’s growth to be 5.1 percent and 4.9 percent respectively for this year.

S&P Global Ratings recently revised down its growth projection for China to 4.8 percent in 2023, down from the previous estimate of 5.2 percent.

The International Monetary Fund (IMF) has cautioned that if there is a sudden global slowdown, including in China, it could negatively impact global trade and put pressure on the Philippines’ exports of goods and services.

“Sharp swings in market sentiment and risk premia could trigger a sudden tightening of financial conditions, capital outflows, and depreciation of the peso,” Diokno said.

“Intensification of geo-political tensions and fragmentation could disrupt supply chains and investment,” he added.

For 2023, the Philippine economy is projected by the government to grow by six percent to seven percent.

Meanwhile, Diokno highlighted three main channels through which the financial systems in the ASEAN+3 region could be exposed to risks arising from China’s property sector.

Firstly, there is a direct risk through any lending to the property sector. Secondly, there is an indirect risk from their exposure to other financial systems that are connected to the property sector.

Lastly, there is an indirect risk from lending to their own domestic economy, which may be adversely affected by developments in China.

According to the analysis conducted by the ASEAN+3 Macroeconomic Research Office, except for Hong Kong, the markets do not anticipate significant direct or secondary spillovers to regional financial systems through China’s property sector or China’s and Hong Kong’s financial systems.