Singapore services export recovery lagged goods trade rebound as border closures hit travel

SINGAPORE’S services export recovery is trailing the rebound in merchandise shipments, as the travel segment has yet to return to pre-pandemic levels, data out on Wednesday (May 25) showed.

That’s as the Covid-19 pandemic prompted a worse drop in services trade than during the earlier global financial crisis and the severe acute respiratory syndrome (Sars) outbreak.

Services trade was dragged down during the pandemic by the underperformance in travel services, which used to account for nearly a tenth of all services exports until Covid-19 struck.

Travel services exports are defined as the consumption of goods and services by travellers who are in Singapore for less than one year. The recovery in this segment has been slow, with travel services at just 27.1 per cent of pre-pandemic levels as of end-March 2022.

Similarly, the “other transport services” category was at 65.4 per cent of pre-pandemic levels, on the weakness in air and sea passengers – although overall transport services were still buoyed by strong air cargo demand from the e-commerce, pharmaceuticals and electronics markets.

Still, Ministry of Trade and Industry economist Ang Yu Sheng noted in his latest report that “Singapore’s services exports are expected to continue to grow in 2022”, on the back of further easing in border restrictions, which is likely to lift exports of travel and other transport services.

Though Singapore’s trade sector is led by goods shipments on a value basis, services export growth had outpaced merchandise exports from 2011 to 2019 – growing by 96.0 per cent over the decade, against the more modest expansion of 1.8 per cent in merchandise.

But services exports shrank by 1.6 per cent year on year in 2020, then picked up by 6.7 per cent in 2021 and 7.1 per cent in the quarter of 2022. In contrast, merchandise exports fell by 3.2 per cent in 2020, but jumped by 19.1 per cent in 2021 and 18.8 per cent in the first quarter of 2022.

The ratio of services export value to merchandise export value slid from 55.2 per cent in 2019 to 50.3 per cent in 2021, despite rising on a dollar basis from S$294 billion to S$309 billion.

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Ang noted in his report that services exports took 7 quarters to return to pre-pandemic levels – making the decline the most protracted to date, compared with the 6 quarters taken to recover from the global financial crisis in 2008, and 2 quarters to bounce back from Sars in 2003.

But Ang noted that digital transformation in regional enterprises, as well as the ability to remotely deliver certain services during the pandemic, have also supported segments such as telecommunications, computer and information, financial, and other business services.

For example, financial services exports “were bolstered by the exports of payments processing players, which had benefited from the shift to online business platforms”, he said.

He added: “Over the longer term, there will be many new opportunities for Singapore’s services exports, especially as economic growth and the rising middle class in economies like China and Asean will lead to an increase in demand for services.

“At the same time, it is important for Singapore to continue to develop its capabilities as a business and logistics hub, so that it remains well-positioned to serve the region’s demand.”