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No respite for Singapore exports; trade recovery unlikely in 2019

A further 10% slide in April prompts expectations of cuts in exports and GDP forecasts, and status quo on monetary policy

A view of Singapore's Pasir Panjang container terminal. Exporters will have to hang tight as there remains no clear end in sight to the trade conflict, which is happening alongside a tech down cycle and slowing global growth.


THE escalating US-China trade war is likely to further hurt Singapore's exports for the rest of 2019, as hopes fade for a sustained trade recovery in the near future, said economists.

Exporters will have to hang tight as there remains no clear end in sight to the trade conflict, which is happening alongside a tech down cycle and slowing global growth, they added.

This comes as Singapore's non-oil domestic exports (NODX) saw no respite in April, extending its double-digit decline for the second straight month.

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It plunged by 10 per cent last month after a shock dive of 11.8 per cent in March, according to the latest data by Enterprise Singapore (ESG). This again surprised economists, who were expecting a milder 4.6 per cent drop in April.

ESG blamed a high base from a year ago for the worse-than-expected figures, but it was also clear from the dismal performance seen over the course of the year that there has been a persistent slowdown in exports.

Year-to-date, Singapore's NODX has declined by 7.3 per cent, and economists are expecting the official full-year NODX growth forecast of 0-2 per cent to be cut.

Economists are mostly pessimistic - or cautious at best - on the outlook for Singapore's exports, with a lot hinging on a US-Sino trade deal that is proving elusive so far.

"We had previously projected a weak growth recovery in the second half of the year on the back of a trade deal by June, but this may not materialise as China appears to be taking a harder stance towards Trump," wrote Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye in a note.

"The trade war is also broadening to a tech war, with US export controls against Huawei likely to disrupt the tech supply chain."

Prakash Sakpal, economist at ING Asia, pointed out that Singapore is among the front-line Asian economies to face the brunt of the recent escalation of trade tensions between the world's two largest economies.

"With trade tensions moving to the next level of more and higher tariff barriers, things could get even worse from here on," he said.

The contraction in April saw declines in both electronics and non-electronics shipments, indicating broad-based weakness.

Domestic exports of electronics products continued to be dismal, falling by 16.3 per cent in April, after the 26.7 per cent decline in the previous month. Integrated circuits (ICs) or semiconductors, disk media products and parts of ICs contributed the most to the fall.

Non-electronics exports also contracted for the second consecutive month, decreasing by 7.9 per cent in April, continuing the 7.1 per cent seen in March. Pharmaceuticals, which are known to be volatile, led the fall with a decline of 46.6 per cent. This was followed by specialised machinery and petrochemicals.

On a month-on-month seasonally adjusted basis, NODX dipped by 0.6 per cent in April, following the previous month's 14.3 per cent contraction.

Non-oil exports to the majority of Singapore's top markets declined in April, except Hong Kong and the US. The decline was mainly due to the European Union, Japan and China markets.

With the latest NODX numbers in the bag, economists - including Barclays, Nomura and Maybank Kim Eng - said there are significant downside risks to their full-year gross domestic product (GDP) growth forecasts.

They also expect the Ministry of Trade and Industry to downgrade its official growth expectations from slightly below the midpoint of its official 1.5-3.5 per cent forecast range when it releases its next Economic Survey of Singapore on May 21.

With the outlook bleak, economists also expect no further monetary policy tightening this year.

Barclays economist Brian Tan said: "As we do not expect the dark clouds looming over the economic growth outlook to clear this year, our base case is for the MAS (Monetary Authority of Singapore) to stand pat at its October meeting, as it did in April."