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Singapore exports see biggest fall since 2016, raising risks to GDP forecast

Singapore's export growth returned to the negative zone in March, partly on the previous year’s high base, according to government agency Enterprise Singapore (ESG) on Wednesday.

SINGAPORE’S export growth returned to the negative zone in March, partly on the previous year’s high base, according to government agency Enterprise Singapore (ESG) on Wednesday.

Non-oil domestic exports sank 11.7 per cent year on year - the biggest fall since a 12 per cent fall in October 2016 and far worse than the median decline of 2.2 per cent predicted in a Bloomberg poll of private economists, who have also pointed to China’s economic slowdown, lacklustre chip demand and trade tensions as headwinds.

This was against the 4.8 per cent export growth notched in February, which was revised mildly downwards from a preliminary figure of 4.9 per cent.

DBS senior economist Irvin Seah had said in a report just the previous day that there should be “some positive ‘payback’ in industrial production and export numbers in the coming months”, as manufacturing sentiment metrics in the region seemed to point to inventory restocking.

But the payback appears to not have been delivered, as exports of both electronic and non-electronic products fell in March. The three-month moving average, which has been negative since December 2018, showed a year-on-year drop of 6.4 per cent.

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Exports “declined from the high base a year ago” overall, said ESG in its monthly report.

Electronic shipments shrank by the most since 2013, contracting by 26.7 per cent year on year last month after an 8.2 per cent drop in February. Save for November 2018, electronic export growth was negative year on year throughout 2018. The slump was led by disc media, as well as personal computers and integrated circuits.

United Overseas Bank economist Barnabas Gan said that, “with electronic exports contracting for 15 of the past 16 months, it does suggest that Singapore’s electronic cluster could remain weak for an extended period of time in tandem with the weakness in semiconductor demand and exports in the region”. He also said that an electronics recovery would “remain contingent on global trade tensions, demand for technology goods and consumer electronics”.

Meanwhile, non-electronic exports dropped by 7 per cent, compared with the 9.4 per cent increase notched in February - no thanks to double-digit contractions in pharmaceutical, specialised machinery and petrochemical shipments.

Exports from the volatile pharmaceutical cluster were down by 36.5 per cent year on year, with specialised machinery lower by 24.4 per cent and petrochemicals shrinking by 15.1 per cent.

Overall, non-oil domestic exports were down by 14.3 per cent on a monthly, seasonally adjusted basis, against a 16 per cent expansion the month before.

Mr Seah said in an update on Wednesday that the month-on-month fall “is indeed a concern”, and added that a turnaround in both the monthly change and electronics demand “will be crucial for an improvement in the overall manufacturing sector performance”.

Exports to almost all of Singapore’s top 10 markets were down in March, except for the United States. The fall was especially marked in Japan, Taiwan and Hong Kong.

“Although peculiar, it may well suggest some lag effect in the transmission process as many of these Asian economies are slower in seeing improvements in economic conditions. It remains to be seen how long such doldrums will persist,” said Mr Seah.

To top things off, exports to emerging markets also slid - to the tune of 21.9 per cent - with the decline led by markets in Latin America and the Caribbean.

Barclays economist Brian Tan called the weakness broad-based and warned that, if the ends up “more persistent or severe than we expected”, Singapore’s full-year gross domestic product - already on track for a year-on-year slowdown - could take a worse hit.

Economists Chua Hak Bin and Lee Ju Ye, from Maybank Kim Eng, also flagged in their report the risk of a cut to the official growth forecast.

“We expect the weakness to continue into (the second quarter) as external demand stays muted, and also due to the high base effects from the previous year,” they added.

ESG’s trade outlook, announced in February, is for non-oil domestic export growth to moderate in 2019 to between zero and 2 per cent, against a 4.2 per cent increase in 2018.

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