Surprise export dive sparks fears of revision in GDP outlook

Singapore

REGIONAL economies were behind the shock double-digit drop in Singapore's March exports, even as economists warned of a worsening drag on full-year economic growth.

With Asia sneezing, the Republic may well be catching a cold from the chill that's set into global electronics.

Non-oil domestic exports plunged by 11.7 per cent year on year last month, according to data from Enterprise Singapore (ESG) on Wednesday.

The slide - the worst since October 2016 and far below the 2.2 per cent dip that was forecast by private economists - returns exports to negative territory, after a month's reprieve.

The export growth posted in February was also lowered by a jot, to 4.8 per cent, from preliminary figures.

ESG said that the steep decline was on exports coming down "from the high base a year ago", but private-sector watchers reiterated that slowing growth in China, the world's lacklustre electronics demand, and global trade tensions also bear some blame.

Electronics shipments, which were in decline for almost every month last year, extended their losses with a 26.7 per cent contraction in March.

The rot also spread, as non-electronic exports reversed February's 9.4 per cent growth to shrink by 7 per cent instead. The ever-volatile pharmaceutical industry proved a fickle paramour as it posted a whopping 36.5 per cent contraction in exports, against growth of 12 per cent before.

Prakash Sakpal, ING economist for Asia, told The Business Times in an e-mail: "Electronics remain a weak spot in Singapore's exports, though it's consistent with the trend observed in Asia's electronics heavyweights South Korea and Taiwan, and squares with a sharp slowdown in global semiconductor sales since last October. It appears that the global technology slump is overtaking US-China trade tensions as driver of Asian trade."

Most of Singapore's leading export markets are in Asia, except for the US and the European Union. And exports to most major trading partners fell: The US was the only market in its top 10 to see exports increase, with growth of 23.1 per cent.

Otherwise, exports were pulled down by neighbouring markets, especially Japan, Taiwan and Hong Kong.

"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," noted the upbeat Irvin Seah, senior economist at DBS.

While the drop in exports to Japan was driven by pharmaceuticals, shipments of electronics parts also fell across the board, even to the US.

United Overseas Bank economist Barnabas Gan reiterated over the phone with BT that "the softness in Singapore is really a reflection of the lacklustre regional prints". That's also a function of Asia's dependence on electronics industries, he added, naming Japan, South Korea, Taiwan and China as some other victims.

Euben Paracuelles and Charnon Boonnuch suggested in a Nomura report that the slump in global technology will keep weighing on factories.

"Our leading indicator for Asian exports also suggests that a downturn will likely deepen further in Asia, at least until May," they added.

Watchers were not thrilled by what the trade numbers may herald for the year's gross domestic product (GDP). The Ministry of Trade and Industry's flash estimates last week suggested that the economy may have hit decade-low quarterly growth in the first three months - at just 1.3 per cent.

"If the weakness turns out to be more persistent or severe than we expected, this would imply downside risks to our forecast of GDP growth," said Barclays economist Brian Tan.

He added that MTI could even lower its full-year economic outlook - now stated to be "slightly below" the mid-point of a range from 1.5 per cent to 3.5 per cent - when the first-quarter GDP print is firmed up in May.

Economists Chua Hak Bin and Lee Ju Ye, from Maybank Kim Eng, also flagged in a 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 wrote.

Still, Singapore's latest export data came out on the same day that China charted better-than-expected growth of 6.4 per cent for the first quarter.

DBS' Mr Seah said policy stimulus in China - which is a key market for Singapore - could lift exports in the months ahead: "Specifically, stronger credit growth and a positive wealth effect from the recent run-up in the equity markets will provide added impetus, but it'll take time for consumers to loosen their purse strings."

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