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Updated quick takes: Singapore's NODX contraction eases in April, but outlook still weak

SINGAPORE'S non-oil domestic exports (NODX) continued to decline in April, albeit at a softer pace.

On Tuesday, trade promotion agency International Enterprise Singapore said NODX fell by 7.9 per cent in April to S$13.3 billion compared to a year ago following a 15.7 per cent contraction in March, due to a decline in both electronic and non-electronic NODX.

NODX to all of the top 10 NODX markets, except the European Union 28 and Hong Kong, declined from a year ago. The largest contributors to the contraction were Taiwan, South Korea and Indonesia.

Here are some economists' comments:

Irvin Seah, senior economist, DBS:

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"While this is an improvement from the 15.7 per cent plunge in the previous month, it's premature to call the bottom at this juncture.

"Ultimately, the decline has been broad-based with contractions in exports of both electronics and non-electronics products. Moreover, except for Europe and Hong Kong, export growth to all key markets was in the red, underscoring the persistent weakness in global demand.

"Perhaps the only silver lining is that NODX rose by 4.5 per cent month-on-month seasonally adjusted. But this could just be a technical payback from two consecutive months (Feb-Mar) of exceptionally low export values. The biggest concern is that non-oil retained imports of intermediate goods (NORI) have continued to fall. This is the second consecutive month of decline and the extent of moderation has been rather significant. Lower NORI essentially makes for lower export values later on.

"In short, we're not out of the woods yet as far as export performance is concerned. Manufacturers/exporters are still struggling with weak demand and this will eventually manifest itself in the headline GDP growth figures. All is not well on the external front. Time to tighten the belt."

Alvin Liew, economist, UOB:

"And even as this decline is half of the -15.7 per cent year-on-year (y-o-y) slump it suffered in March, this is cold comfort to the broader economy and marks a gloomy start to Singapore's 2Q GDP.

"The medium term trend for Singapore's NODX performance is still a weak one and we should expect NODX to clock in few more contractions in next few months although we are not looking for double-digit declines.

"Singapore's NODX will remain weak in the next few months and while we are expecting a 3.3 per cent y-o-y contraction in 1H 2016, the decline may be deeper than that judging by the protracted weakness seen in March-April NODX declines.

"Even as we believe NODX improvement will mostly take effect in 2H 2016 and we are keeping our 2016 full-year NODX growth forecast at 2.1 per cent for now, admittedly the balance of risks to our forecast is on the downside especially if the uncertainties in China's & the broader global economy's growth outlook is amplified in the coming months."

Selena Ling, head of treasury research & strategy, OCBC Bank:

"The trade outlook, especially for the region, remains lacklustre, and this NODX slump could drag into 2Q16. We expect 2Q16 GDP growth to potentially contract up to 1.0 per cent q-o-q saar (seasonally adjusted annual rate) as manufacturing underperformance persists (forecast: -2.1 per cent y-o-y).

Weiwen Ng, economist, Asean and Pacific, ANZ Research:

"The pace of contraction in Singapore NODX eased, with manufacturing exports supported by fading drags from global inventory correction.

"Still, export data from Singapore as well as the region confirm persistent cyclical and structural pressures on Asian trade.

"The abating of growth momentum and probable scaling back of aggressive monetary easing in China will pose a significant headwind for Singapore given our high economic beta to the Chinese economy.

"Should the dismal export print persist or worsen, it will raise the odds of downside risks to Singapore's growth and put an October MAS (Monetary Authority of Singapore) easing into, though that's not our base case at this juncture."

Nomura Global Research:

"Electronics exports remained weak, declining 7.4 per cent y-o-y in April after falling by 9.1 per cent in March. In sequential terms, the official press release stated that seasonally adjusted electronics exports were flat, in contrast to the expansion in non-electronics exports.

"Exports of pharmaceuticals, which tend to be volatile, surged by 17.9 per cent y-o-y in April after a sharp 30.9 per cent decline in March, helping reduce the contraction in headline NODX.

"Excluding pharmaceuticals, we estimate NODX growth barely improved at -11.3 per cent y-o-y from -13.4 per cent in March, suggesting a still weak underlying picture.

"By destination, the decline in NODX growth was led by Korea (-26.7 per cent), Taiwan (-22.5 per cent), Indonesia (-20.4 per cent) and Japan (-10.1 per cent).

"Overall, the data remain consistent with our view that the outlook for the Singapore economy remains weak. We note that non-oil re-export (NORX) growth, which is linked to the wholesale trade services sector, also remained weak at -2.8 per cent y-o-y in April from -3.0 per cent in March. This suggests services activity will likely remain soft into Q2. We reiterate our 2016 GDP growth forecast of 1.8 per cent, slowing from 2.0 per cent in 2015."

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