Singapore’s export growth in coming months likely to be dragged down by China’s slowdown: economists

SINGAPORE’S export growth could continue to ease in the coming months, with global headwinds likely to dampen external demand even as Asean’s reopening offers a silver lining, said economists.

Already, non-oil domestic exports (NODX) growth in April eased for the fifth straight month to 6.4 per cent year on year, according to data from Enterprise Singapore on Tuesday (May 17), a result that was largely in line with the 6.5 per cent growth that private-sector economists polled by Bloomberg were expecting. Exports in March grew 7.7 per cent.

Shipments of electronic products extended the previous month’s gains with a 12.8 per cent year-on-year growth in April, while non-electronic exports in the same month slowed to 4.6 per cent.

Sequentially, exports fell 3.3 per cent in April, following the 2.3 per cent decline in the previous month.

“NODX momentum is clearly moderating with the twin headwinds of slowing growth prospects amid the supply chain disruptions, frontloading of monetary policy tightening, the Russia-Ukraine conflict and China’s zero-Covid related lockdowns,” said OCBC chief economist Selena Ling.

China’s slowdown is of particular concern, said economists, and the lockdowns have not only disrupted supply chains and factory production, they have also weighed on business confidence and private consumption.

UOB economist Barnabas Gan noted that China’s high-frequency data remains lacklustre, with industrial production and retail sales both shrinking in April while the Caixin Composite Purchasing Managers Index plunged to its lowest since the Covid-19 pandemic started.

Accordingly, NODX to China shrank 10.6 per cent year on year, the first contraction since August last year.

Calling this a “key source of concern going forward”, Priyanka Kishore, head of India and South-east Asia economics at Oxford Economics, said she now expects China’s gross domestic product (GDP) to hit just 4 per cent this year, below its official growth target of 5.5 per cent.

Likewise, she is downgrading her economic outlook for Singapore to 2.9 per cent, from 3.3 per cent.

“Given the downside risks posed to China’s growth trajectory from its Covid-19 containment strategy and its important position as a source of final demand in Asia and globally, we have now lowered our 2022 Singapore GDP growth forecast to below 3 per cent,” said Kishore.

This is a notch below the Ministry of Trade and Industry’s (MTI) forecast of 3-5 per cent for the full year.

Maybank economists Chua Hak Bin and Lee Ju Ye said they are maintaining their GDP outlook at 2.8 per cent, although they are expecting MTI to downgrade its forecast bracket to 2-4 per cent next week when the ministry is expected to release its final print for the first quarter.

UOB’S Gan said he is cautious about downside risks from geopolitical tensions and worsening Covid-19 developments in China in the near term, which could depress trade demand, especially in Asia, while dealing another round of temporary supply chain disruption due to raw material shortages.

But he added that exports to most of Singapore’s key destinations were still resilient, suggesting that Asia remains “relatively insulated” from geopolitical tensions surrounding Ukraine.

Other than China, Hong Kong and South Korea, Singapore’s key exports to its other top 10 markets rose on the whole.

Exports to Taiwan jumped 29.9 per cent year on year in April, following a 0.6 per cent rise the previous month, due to a 312.3 per cent surge in the exports of parts of integrated circuit.

NODX to Asean were a bright spot in April, said the Maybank economists, with robust growth to Malaysia, Indonesia and Thailand as the reopening momentum gathered pace.

Malaysia took second place in April with exports growing 20.7 per cent year on year, although this was slower than the previous month’s 29.1 per cent growth.

“The recent improved NODX growth to regional markets like Indonesia, Thailand and Malaysia suggests that the reopening of borders and relaxation of Covid-19 measures as part of the shift to a Covid-endemic environment have benefited the domestic demand conditions,” said OCBC’s Ling.

Said the Maybank team: “Asean’s reopening is providing some tailwind to the recovery, but growing global headwinds will likely overwhelm and dampen Singapore’s growth momentum by the second half.”