Singapore exports to post more modest growth in 2022 after cresting a decade high

SINGAPORE'S export growth is expected to moderate this year, after the trade sector expanded at its fastest clip in a decade last year.

Besides the high base effect, the world economy faces downgrades to its growth outlook on the spread of the Omicron strain of the novel coronavirus, trade agency Enterprise Singapore (ESG) warned.

Still, the outlook remains positive, with ESG on Thursday (Feb 17) holding to its forecast for non-oil domestic exports (NODX) to rise by 0 to 2 per cent year on year in 2022, having starting the year with growth of 17.6 per cent in January.

"Rising selling and export prices on semiconductors and petrochemicals will likely support nominal NODX growth this year, even if volumes moderate," Chua Hak Bin, senior economist at Maybank IBG Research, told The Business Times.

UOB economist Barnabas Gan expects full-year NODX to come in at the higher end of the official forecast range - "a modest 2 per cent with upside risks"; Chua and his colleague Lee Ju Ye forecast an increase of 4 per cent to 6 per cent, and OCBC chief economist Selena Ling believes NODX could expand by as much as 8 per cent in 2022.

Full-year NODX blew past the official forecasts in 2021 with growth of 12.1 per cent, said ESG - well ahead of the projected 9.5 per cent to 10 per cent increase, and improving from 4.3 per cent in 2020.

ESG has noted that higher oil prices are expected to support oil trade in nominal terms and lift total trade in 2022, but also cited cuts to the International Monetary Fund outlook for global economic and trade growth. Thus, Singapore's NODX growth "is expected to moderate from the high base in 2021", the trade agency said.

But Singapore still began 2022 on a strong footing, with the NODX growth in January coming in above private-sector analysts' earlier forecast of 12.4 per cent growth. The latest print shows "external demand is holding up and likely to continue supporting manufacturing activity this year", said Brian Tan, an economist at Barclays.

ESG attributed the growth to shipments of non-electronics such as ship structures, specialised machinery and petrochemicals, with non-electronics NODX expanding by 18.6 per cent in January.

Electronics NODX grew by 14 per cent, boosted by integrated circuits, personal computers, and disk media products.

Headline NODX rose in 7 of the Republic's top 10 markets, on demand from the US, mainland China and the European Union for products such as specialised machinery, non-monetary gold, petrochemicals and pharmaceuticals.

JPMorgan economic and policy research analyst Ong Sin Beng wrote in a note: "The turn in non-pharma and non-electronics exports is encouraging, given the general resonance with global demand."

Said Gan from UOB: "The export demand for Singapore's electronic and non-electronic products had continued in January 2022, suggesting that the export environment continues to stay buoyant despite Covid-19-related risks."

Jung Sung Eun, senior economist at Oxford Economics, said external headwinds might weigh on trade in the first six months of 2022, but "export momentum should improve in the second half as global supply chain disruptions gradually ease and a wider vaccination coverage bolsters demand in South-east Asian economies".

Similarly, Chua and Lee from Maybank wrote: "We think both electronics and non-electronics will continue to rise at slower but healthy rates in 2022, on the back of sustained demand for chips and related equipment and petrochemicals, and higher export prices."

Non-oil re-exports (NORX), a proxy for wholesale trade, grew 21.8 per cent year on year in January, while total trade rose 25 per cent.

On a monthly, seasonally adjusted basis, NODX was up by 5 per cent to S$18.1 billion in January.

Overall, total merchandise trade grew by 19.7 per cent in 2021, after having declined by 5.2 per cent in 2020; services trade rose by 6.8 per cent, against a dip of 0.7 per cent before. NORX was up by 19.2 per cent, against 0.1 per cent in 2020.

ESG noted that trade was supported by higher oil prices and rises in both electronic and non-electronic NODX, "amid favourable sector-specific output and exports trend".

The trade sector benefited from a jump in shipments in the final quarter of 2021. Headline NODX rose by 20.1 per cent in the October-to-December period, up from 9.0 per cent in the 3 months prior.