ESG maintains official 2021 non-oil export estimate; economists more optimistic

GLOBAL vaccine distribution should boost Singapore's recovery and export growth this year, said economists, with some having more optimistic forecasts than trade agency Enterprise Singapore (ESG), which on Monday maintained its modest forecast for non-oil domestic export (NODX) growth.

NODX remains expected to grow by zero to 2 per cent year on year in 2021, slowing from 2020, ESG said in its quarterly review of trade performance.

But the forecast for total merchandise trade has been upgraded to growth of 2 to 4 per cent, up from an earlier forecast of 1 to 3 per cent growth, made in November.

"There remains uncertainty in the global economy and recovery could be uneven across economies," said ESG.

But it added that improved oil prices since the last update a quarter ago "may provide some support for our oil trade in nominal terms and in turn total trade in 2021".

NODX fell 0.5 per cent year on year in the fourth quarter of 2020, reversing from the third quarter's 6.5 per cent growth, as a 2.6 per cent rise in electronic domestic exports could not make up for a 1.4 per cent decline in non-electronic NODX.

This took full-year NODX growth to 4.3 per cent, within the official forecast of 4 per cent to 4.5 per cent and recovering from 2019's 9.2 per cent decline.

On a seasonally adjusted quarter-on-quarter (q-o-q) basis, the fourth quarter decline was deeper at 4.7 per cent, with falls in both electronic and non-electronic NODX, by 3.7 per cent and 4.9 per cent respectively.

NODX to Singapore's top markets grew in 2020, with the biggest contributors to the increase being the US, up 38.3 per cent; Japan, up 26.1 per cent; and South Korea, up 27.2 per cent.

But of the top 10 markets, NODX fell for four: China, Hong Kong, Indonesia and Malaysia.

Looking towards 2021, ESG noted expectations of an uneven global recovery: "There remains risks and uncertainties in the global economy, with growth forecast for some of Singapore's key trade partners such as the US and Japan upgraded, while that for China, Asean-5 and the euro area was adjusted downwards."

Total merchandise trade fell 5.2 per cent in 2020 to S$969 billion, due mainly to a 31 per cent fall in the oil trade amid lower oil prices compared to a year ago. This more than snuffed out the 0.7 per cent rise in non-oil trade.

But this was still a better showing than the official forecast of -7.5 per cent to -7.0 per cent.

Given this low base in 2020, ESG's forecast of 2 to 4 per cent growth for 2021 "is partial normalisation rather than a full-fledged recovery", said OCBC head of treasury research and strategy Selena Ling.

Total services trade fell 14.3 per cent to S$497.1 billion, in contrast to 2019's 5.7 per cent growth.

Separately, the Ministry of Trade and Industry on Monday maintained a full-year gross domestic product growth forecast of 4 to 6 per cent for 2021, after the Singapore economy contracted 5.4 per cent in 2020.

The manufacturing sector had seen the strongest growth last year, and economists expect this to persist into 2021, with exports also growing accordingly.

"Exports and manufacturing proved relatively resilient in 2020 and will likely continue to lead the recovery this year, especially as vaccines are distributed in developed markets in the near term, lifting external demand," said Barclays economist Brian Tan.

DBS economist Irvin Seah expects increased global business and trade transactions this year, which will benefit externally-oriented services such as financial and trade-related services. His forecast is for NODX to grow 2.3 per cent in 2021.

Even more optimistic are Maybank Kim Eng economists Lee Ju Ye and Chua Hak Bin, who expect NODX to grow 3 to 4 per cent this year, supported by healthy demand for semiconductors - which account for some 11 per cent of total NODX - and the recovery of non-electronics exports such as petrochemicals, which form some 7 per cent of total NODX.

Ms Ling, however, is relatively cautious, with a full-year NODX growth forecast of 1.5 per cent "on the back of a gradual global and domestic recovery story, aided by vaccine and partial normalisation in business and consumer confidence".

"For Singapore, as a trading and export hub, the pace of vaccine-fuelled recovery in global demand and trade is key," she said.