Economic Outlook for Southeast Asia, China and India 2023 - Update

Growth in services exports is expanding and has overtaken growth in goods exports

A positive trade outcome in 2023 is that while the world is struggling with a slowdown in demand for manufactured goods and commodities, exports in tourism, ICT, finance and other professional services continued to strengthen. Services exports have been rapidly expanding worldwide, underpinned by robust demand, rising prices of services, and the increasing digital integration of economies. In 2022, world services exports reached USD 7.2 trillion, an annual increase of 15.3% (UNCTAD, 2023). International travel receipts increased by 92% on the back of pent-up demand and rising prices (UNCTAD, 2023). Asia and the Pacific registered the highest services export growth among the world’s regions, largely driven by international travel receipts.

In Emerging Asia, services exports rose strongly in the first half of 2023, helping keep export activity afloat in most of the region’s economies amid the substantial decline in merchandise goods. Annual growth of services exports has outpaced growth in merchandise exports in most major economies in Emerging Asia (Figure 5). This gap is expected to widen in the near term amid the rapid expansion of services exports globally and continued weakening demand for goods exports from advanced economies. In India, the upsurge of export growth was mainly driven by the stronger than expected performance of services exports, underpinned by robust retail trade, software services, commercial real estate and tourism. Thailand’s services exports will continue to support overall export growth for the rest of 2023, aided by China’s reopening, while the development of subsectors such as finance and logistics will contribute to the expansion of services exports. Singapore’s modern services sector, including logistics and other advanced services such as finance, insurance, telecommunications, ICT and professional services, will remain a key contributor to GDP growth in the near term. In China, services exports are also forecasted to rise as the economy recovers from zero-COVID policy. These exports are now fuelling the revival of overseas construction projects.

Figure 5. Export growth in goods vs. services in selected Emerging Asian countries (%)

Source: CEIC.

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While services exports are rapidly expanding globally and regionally, they still account for a relatively smaller share of total trade than merchandise exports do. Hence, despite the gains achieved by the subsector, the considerable slump in merchandise exports led to an overall decline in exports. Nevertheless, the share of services exports will continue to expand across most major economies in Emerging Asia going forward. Although current estimates indicate that international tourism is the major driver of growth, the development of other forms of services exports will ensure the continued expansion of the subsector such as the imminent supply chain reconfiguration directed towards ASEAN and India. Moreover, the rapidly developing cross-border e-commerce sector, including its complementary services such as transport, warehousing and other logistics operations, will continue to fuel demand for services exports in the near term.