Singapore on track for highest export growth in a decade in 2021

SINGAPORE has upgraded trade forecasts for the fourth time running, even as non-oil domestic export (NODX) growth will ease in the year ahead.

NODX is now expected to grow by between 9.5 per cent and 10 per cent year on year in 2021, from 7 per cent to 8 per cent projected in August. This would mark the fastest pace of growth since 2010, when exports expanded by 22.8 per cent.

The high base will see growth slow to between 0 and 2 per cent in 2022, said trade agency Enterprise Singapore (ESG) on Wednesday (Nov 24), while calling this outlook a "cautiously optimistic forecast".

Meanwhile, total merchandise trade growth has been forecast at 17 per cent to 17.5 per cent for 2021, against 13 per cent to 14 per cent before.

The latest upward revision came as ESG noted better-than-expected trade performance in the year so far, as well as "robust global semiconductor demand".

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye wrote that "external-oriented sectors will likely remain resilient as global demand improves" and suggested NODX growth could beat the official forecasts.

"We are expecting stronger NODX growth of 11 per cent in 2021 and 5 per cent to 7 per cent in 2022, as the economic reopening in the region will support trade activities and reduce supply disruptions," they said.

Still, ESG noted that "the pace of growth is expected to moderate in 2022 from the high base in 2021", while the growth of the oil trade may also ease on stabilising prices, as global stocks build up and global demand slows down.

Already, Barclays economist Brian Tan has estimated that "a sequential expansion in third-quarter domestic demand offset a drag from net exports and inventories" for the period.

"Net exports became a sequential drag in the third quarter as the 1.7 per cent quarter-on-quarter, seasonally-adjusted expansion in imports of goods and services - in line with the jump in fixed investment - outpaced the 0.3 per cent increase in exports," he said in a morning note.

Still, economists Kit Wei Zheng and Ang Kai Wei from Citi said in a report: "Despite modest demand headwinds, exports and manufacturing capex should be sustained into the first half of 2022."

That's even as headline NODX rose by 9 per cent year on year in the July-to-September period, compared with 10.1 per cent in the quarter before.

Exports were driven by both electronics, which saw shipments increase by 15.3 per cent year on year, and non-electronics, which grew by 7.1 per cent as global semiconductor demand also boosted specialised machinery exports.

"Electronics and related specialised machinery exports had supported NODX growth and is expected to continue amid robust global semiconductor demand, while petrochemicals NODX grew for the 3rd straight quarter year-on-year after declining amid a global downcycle in 2019 and 2020," ESG said in its report.

On a seasonally adjusted, quarterly basis, NODX rose by 0.8 per cent in the third quarter, compared with a decline of 3.9 per cent in the 3 months prior.

China, Taiwan and South Korea were the key markets behind Singapore's NODX growth in the quarter, and helped to offset declines in shipments to other major destinations such as the United States and European Union.

Non-oil re-exports (NORX) - a proxy for the wholesale trade sector - grew by 16.4 per cent year on year in the third quarter, against 26.6 per cent in the second quarter, largely on higher re-exports of electronics products such as integrated circuits.

Overall, merchandise trade increased by 19.1 per cent, cooling from 27.3 per cent in the second quarter, as higher oil prices fuelled the oil trade, and non-oil trade growth remained firm on the electronics cluster's contributions.

Total services trade grew by 7.5 per cent to S$130 billion in the third quarter, compared with 13.3 per cent in the previous 3 months, with uplift from other business services, financial services, and maintenance and repair services.

Separately, the Ministry of Trade and Industry has on Wednesday narrowed the full-year gross domestic product growth forecast to "around 7 per cent" in 2021, from a previous forecast range of between 6 and 7 per cent.

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