China slowdown threatens trade growth as Singapore exports ease for 4th straight month in March

SINGAPORE’S non-oil domestic export (NODX) growth slowed for the fourth month in March, despite pulling ahead of private-sector economists’ forecasts with a fillip from non-monetary gold shipments.

Besides energy costs and supply disruptions from war in Ukraine, analysts have also flagged mainland China’s stringent zero-tolerance stance on Covid-19 as a significant downside risk for exports.

“We see the lockdowns as a key downside risk to Singapore’s exports in coming months. However, we remain optimistic about the overall export outlook, because of the still-robust global demand for key exports of electronics and pharmaceuticals which... are also less susceptible to the global growth slowdown,” said Charnon Boonnuch, Asia economist at Nomura.

While Singapore’s trade sector is expected to stay above-water in the medium term, its pace of growth may slacken as an ongoing Covid-19 outbreak in China worsens the global supply chain snarl, analysts said in the wake of the latest data from trade agency Enterprise Singapore (ESG) on Monday (Apr 18).

Headline NODX rose by 7.7 per cent year on year in March, cooling from 9.4 per cent in the month before. On a month-on-month, seasonally adjusted basis, NODX fell by 2.3 per cent to S$17.2 billion.

“Exports continue to be driven and flattered by higher prices rather than volumes,” said Maybank economists Lee Ju Ye and Chua Hak Bin, who noted that NODX was lower in real terms by 3.4 per cent year on year, for its second straight month of decline.

That’s even as Ngai Jin Tik and Ong Sin Beng, from JPMorgan’s economic and policy research team, noted “a sharp divergence in terms of export destinations” in March.

“Shipments to G3 economies picked up significantly, led by the US, while shipments to non-G3 economies softened, especially outside (emerging market) Asia,” they wrote. The G3 markets refer to the US, Japan and the European Union.

Year-on-year growth in NODX to mainland China cooled to 4.8 per cent, compared with 19.1 per cent in February. Lee fingered exports of machinery and equipment, and chemicals and chemical products.

The latest surges in virus infections are prompting tough activity curbs in several major cities in recent weeks – most notably the financial hub of Shanghai, which has been locked down since late March.

The lockdowns are reportedly hitting the automotive sector, as well as production of machinery and technology goods such as smartphones, noted OCBC chief economist Selena Ling in an email.

Nomura’s Boonnuch and Barclays senior regional economist Brian Tan both told The Business Times that March’s drop in NODX growth to China was mainly due to an unfavourable base effect, while the impact of Chinese lockdowns has not yet appeared in the data and will be seen only from April on.

Conversely, export demand from the United States was particularly pronounced in March. The US was Singapore’s top NODX market, as exports reversed February’s 4.7 per cent drop to grow by 68.1 per cent on the back of non-monetary gold, pharmaceuticals and specialised machinery shipments.

Singapore NODX is expected to still be positive in 2022, but will likely tumble from the 12.1 per cent expansion in the year before.

Over at Oxford Economics, Priyanka Kishore, head of India and South-east Asia economics, and senior economist Jung Sung-Eun warned in a joint note of weakening global trade and growth, and added: “We expect export momentum to remain on a weak footing in the second quarter as well.”

Similarly, Ling suggested NODX was “off to a good start” for the year, but expects Singapore’s export growth to ease to 7.9 per cent in the second quarter – down from 11.4 per cent in the first 3 months.

She projected NODX growth of 4 per cent to 8 per cent for the year, while Maybank held to a tighter range of 4 per cent to 6 per cent.

UOB has forecast even slower growth of 2 per cent, based on the risk that near-term deterioration in geopolitics and the Chinese virus situation “would likely depress trade demand especially in Asia”.