A model of container ship with Hanjin Shipping Co’s logo, is displayed at its head office in Seoul, South Korea, Monday, Sept. 5, 2016. Financially troubled Hanjin Shipping Co. will seek stay orders in dozens of countries this week to help minimize disruptions caused by its slide into bankruptcy proceedings, the Financial Services Commission said Monday. AP Photo/Lee Jin-man
MANILA, Philippines – Multilateral organizations said the collapse of South Korean giant Hanjin Shipping Co. Ltd. is a threat to the economic growth of the Philippines.
In its Asian Development Outlook, multilateral lender Asian Development Bank (ADB) said weaker-than-expected export demand from the country’s major markets is among the threats to sustained economic growth for the Philippines this year.
Economic managers penned a gross domestic product (GDP) growth of between six and seven percent this year from 5.9 percent last year.
The economy grew seven percent in the second quarter from 6.8 percent in the first quarter amid strong boost from election related spending. This brought the GDP expansion to 6.9 percent in the first half from 5.5 percent in the same period last year.
This prompted the ADB to revise upwards its GDP growth forecast for the Philippines to 6.4 percent from the original target of six percent for 2016 and to 6.2 percent from 6.1 percent for 2017.
On the other hand, the World Trade Organization (WTO) slashed its global trade forecast, warning that anti-globalization rhetoric as well as the decision of the United Kingdom to leave the European Union (Brexit) were pushing trade growth to its slowest pace since Britain’s financial crisis.
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The WTO said global trade is now estimated to expand by just 1.7 percent instead of 2.8 percent this year.
WTO said growth in trade had fallen to its slowest pace in around seven years when the global financial crisis hit.
It warned “creeping protectionism,” coupled with lacking trade liberalization and perhaps the growing role of the digital economy and e-commerce might help explain the recent declining ratio of trade growth to GDP growth.
Likewise, think tank Economic Intelligence Unit (EIU) said the fall of Hanjin Shipping was an evident sign the industry has hit a crisis point and a massive transition is needed to turn profitability around.
The Hanjin Shipping debacle for now has little effect on the country’s trade since local exporters said they do not extensively use Hanjin vessels.
But a study by SeaIntel cited by the EIU report showed an instant capacity reduction of six to eight percent in trans-Pacific trade and a five to six percent reduction in the Asia-Europe trade as a result of the debacle.
“Hanjin also has major stakes in the ports of Busan and Osaka, which will most likely see high-capacity disruptions, and impaired profitability, as these ports will lose ship calls from Hanjin,” the EIU report said.
It added that ports have also denied access to Hanjin vessels amid fears the company would not be able to pay the fees to dock and store its containers, leaving most of Hanjin’s ships stranded at sea.
The company’s financial woes could be traced back to the financial crisis in 2008, which severely hampered global growth and trade and had a knock-on effect on the shipping industry, which lost an estimated $15 billion, the report said.
“The crisis surrounding Hanjin highlights the severity of the container shipping industry’s slump, which is experiencing its deepest and longest downturn in over six decades. This year itself, major container shipping lines have seen operating profits plunge, with earnings being exceptionally volatile,” the report said.
A study by credit watchdog Moody’s Investors Service also indicated a consistent fall in profits and poor economic climate would drive a negative outlook for the shipping industry over the next 12 to 18 months.
