Asean's ongoing trade slump might become the region's "new normal", some economists have warned.
The regional trade recession, which has had significant impact on Singapore's small open economy, is not just a temporary result of tepid global growth, according to ANZ economists Ng Weiwen and Glenn Maguire. Slower growth in large economies like the United States and China has been weighing on regional trade since the global financial crisis, they noted in a report released on Thursday.
"Even the most optimistic of forecasts indicate that future growth in the US and China is going to be mediocre compared to historical averages, and certainly not as stellar as seen during Asean's high trade growth period," they said. "This means for each unit of economic growth, imports are expanding less than they used to."
Besides slower economic growth, the slide in demand for Asian exports can also be attributed to longer-term structural trends, said the economists. The US economy is on the road to recovery but growth has been largely driven by services instead of the goods trade.
Meanwhile, China is also becoming less exposed to international trade as it shifts away from an industrial-led growth model towards consumption and services.
This means Chinese companies are increasingly sourcing from within the country instead of importing, said the economists. This reconfiguration of supply chains will "lead to a profound structural shift in regional trade, especially with China emerging both as a customer and competitor rather than merely a factory assembler", they added.
China is Singapore's top trading partner and export destination.
But other economists were not as downbeat, and believe that the slowing trade is a symptom of a broader transition to a different model of regional trade.
For one thing, intra-Asean trade will grow in importance relative to the region's trade with China or the US, said United Overseas Bank economist Francis Tan.
This "big structural shift" will mirror a similar transition the region experienced over the past two decades as China rose to global prominence.
"Back in the 1990s before China rose to become a manufacturing powerhouse, Asean was exporting largely to the US and European Union. Since then, the share of exports from Asean to these markets has fallen significantly, but at the same time, the share of exports to China has risen," said Mr Tan.
The structural shift now under way might weigh on Singapore's shipments to China in the short run, but will eventually result in companies here trading more within Asean, said Mr Tan.
This is because rising costs in China have been pushing multinationals, as well as Chinese companies, to look to lower-cost Asean countries.
Trade deals like the Trans-Pacific Partnership and Asean Economic Community are also expected to boost regional integration and trade. "The pie is not going to get smaller, but it'll be a shift," said Mr Tan.