Further weakness ahead for Singapore exports after 5 months of contraction: economists

SINGAPORE’S exports are poised for further weakness in the months ahead, after contracting year on year for the fifth straight month, as uncertainties continue to cloud the global outlook, economists said.

“We continue to expect weakness in global demand on the back of further monetary policy tightening and worries about economic slowdown in the developed markets,” said UOB senior economist Alvin Liew.

He added that high base effects are likely to continue working against Singapore’s export numbers in early 2023, as seen in the first two months of the year. This means export numbers are likely to continue declining in the first half of the year before improving later.

This comes as non-oil domestic exports (NODX) in February shrank 15.6 per cent year on year, easing from the 25 per cent tumble recorded in the previous month, data from Enterprise Singapore showed on Friday (Mar 17).

The performance was just a notch better than the 15.8 per cent contraction predicted by private-sector economists, according to a Bloomberg poll.

Sequentially, NODX fell by a sharp 8 per cent in February, undoing the previous month’s 0.9 per cent growth, and clocking the deepest contraction since September 2020.

Barclays regional economist Brian Tan said that the decline was broad-based and not because of the usual volatile sectors.

“Excluding exports of non-monetary gold and pharmaceuticals – which tend to be volatile – we estimate NODX fell by a much sharper 9.8 per cent month-on-month after seasonal adjustment in February,” he noted.

Shipments of electronic products shrank 26.5 per cent year on year in February, following the 26.8 per cent contraction in the previous month. Non-electronic exports fell 12.1 per cent year on year, easing from January’s 24.5 per cent decline.

Maybank economists Chua Hak Bin and Lee Ju Ye are downgrading their full-year NODX forecast to -7 to -4 per cent, from an earlier estimate of -4 to -1 per cent.

This, they said, is to account for “the weaker performance and rising uncertainties to the global outlook in the wake of the bank turmoil in the US and Europe”.

They are also expecting EnterpriseSG to downgrade its NODX growth outlook – from the current -2 to 0 per cent range – in the next review in May.

Exports to Singapore’s top 10 markets as a whole declined in February, with the United States, Japan and Thailand bucking the trend.

Meanwhile, China’s reopening has not lifted exports to the mainland into positive territory, economists said.

“Any hopes of a big boost from Chinese reopening have been disappointed so far,” said Alex Holmes, senior Asia economist from Oxford Economics. “The value of domestic exports to the region’s biggest economy were still down around 25 per cent year on year over January and February combined, consistent with Chinese trade data showing weak imports.”

Even so, exports to China did pick up with an 11.3 per cent year-on-year contraction, up from January’s 41.1 per cent slump.

While the improvement is encouraging, UOB’s Liew cautioned against calling this the “start of an uptrend”.

Barclays’ Tan noted that the gains were due mainly to non-monetary gold exports, adding: “The data has yet to show a significant lift from the economic reopening there.”

Petrochemicals NODX has also continued to languish despite China’s reopening, HSBC economist Yun Liu pointed out, noting that the mainland is a key export destination for it.

“While it is still an early stage to assess the impact, this partly corroborated our argument that China’s rebound will only likely put a floor to global industrial production, not reverse the broad slowing trend,” she said.

Nonetheless, economists remain sanguine about economic growth, with most of them keeping their full-year gross domestic product outlook for now.

According to Liu, some “pockets of resilience” remain despite the external weakness. “The sectors that have not fully recovered, especially tourism-related sectors will likely receive a punchy boost from China’s reopening.”

Concurring, Maybank economists said the reopening and tourism-related services – such as accommodation, food and beverage services and air transport – are likely to drive growth and help to cushion the contraction in manufacturing and trade.

The small uptick in February’s Purchasing Managers Index back to neutral also provides some hope that the export and manufacturing downturn will be shallower in the coming months, they added.