The Philippines looks to be exposed to the Japanese natural disaster

The earthquake and tsunami that struck Japan on March 11th, leaving some 21,000 people missing or dead, elicited a swift message of sympathy from the Philippines. The president, Benigno Aquino, offered humanitarian assistance, and 10.1 tonnes of food packs and other relief supplies were soon dispatched to the north-eastern coastal regions that were hit hardest by the disaster. Amid concerns about the leak of harmful radiation from the Fukushima Daiichi nuclear power plant, the government announced that the Philippine Nuclear Research Institute would begin random testing of foodstuffs imported from Japan. On March 23rd the Philippines' chief socioeconomic planner, Cayetano Paderanga, said that officials may be forced to downgrade their 7-8% growth forecast for 2011 in response to the Japanese disaster along with the violence presently besetting the Middle East and North Africa.

Of South-east Asia's major economies, the Philippines looks to be more at risk than most from any slowdown in the Japanese economy. For a start, Japan is the country's most important trading partner. In 2010 the Philippines' exports to Japan totalled US$7.8bn, equivalent to 15.2% of its export earnings, making Japan the country's leading export market, according to the National Statistics Office. Indonesia is the only country that has a greater export dependence on Japan than the Philippines. Japan was also the Philippines' most important source of imports in 2010, with shipments totalling US$6.7bn, representing 12.3% of total import payments. Much of the Philippines' trade with Japan is related to the manufacture of electronics products. Philippine electronics producers who depend on Japanese factories for shipments of electronic components may face disruptions to their supply chains in the coming months. Electronics remains an important industry in the Philippines, accounting for around 60% of the country's total export earnings. But, in terms of the impact of lower trade with Japan on overall GDP growth, the Philippines may be less vulnerable than South-east Asia's more trade-dependent economies: in 2010 the Philippines' exports to Japan were equivalent to only 4.1% of GDP. (Singapore's exports to Japan were equivalent to 7.4% of GDP, even though they accounted for only 4.7% of the city state's total export receipts.)

In addition to being an important trading partner, Japan is also home to thousands of overseas Filipino workers and is a major source of foreign direct investment in the Philippines. In 2010 remittances from Filipinos working in Japan amounted to around US$880m, equivalent to 4.7% of the country's total remittance receipts, according to the Bangko Sentral ng Pilipinas (the central bank). Only the US, Saudi Arabia and the UK were more important sources of remittances in 2010. Japan was also the leading source of direct investment in the Philippines in that year. Of the P196.1bn (US$4.5bn) of foreign investment approved in 2010 by the country's four main investment agencies, P58.3bn came from Japan, according to the National Statistical Co-ordination Board. The Japanese natural disasters could result in lower flows of remittances and investment to the Philippines in the coming year or so.