Singapore downgrades 2023 export forecasts again on worse-than-expected performance
Elysia Tan
SINGAPORE has narrowed its 2023 full-year forecast for non-oil domestic exports (NODX) and lowered its total merchandise trade projection on a worse-than-expected performance so far this year, led by the manufacturing downcycle and lower oil prices.
NODX is now expected to shrink by 9 per cent to 10 per cent year on year in 2023, a narrower range than May’s forecast of an 8 per cent to 10 per cent contraction, Enterprise Singapore (EnterpriseSG) said in its quarterly review of trade performance on Friday (Aug 11).
Total merchandise trade is also projected to drop by 9 per cent to 10 per cent, downgraded from the previous forecast of a 6 per cent to 8 per cent contraction.
In May, both forecasts were already downgraded from between zero growth and a decline of 2 per cent.
“The external demand outlook for the rest of 2023 remains weak,” said EnterpriseSG, noting that NODX and total merchandise trade continued to fall in the second quarter of 2023. “Domestically, manufacturing companies remained cautious due to ongoing global economic uncertainties, even as business sentiments in the sector are slightly positive for H2 2023.”
UOB senior economist Alvin Liew said that it is “evident that the electronics downcycle has yet to bottom, and weak demand from more major export destinations are weighing negatively on trade outlook and manufacturing demand”.
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He continues to expect “more pronounced year-on-year NODX contractions for a few more months” before improvements in the later part of H2.
HSBC economist Yun Liu said that “trade headwinds are not dissipating”.
“While there are some initial signs that point to stabilisation in the tech cycle, tech-heavy economies have not seen a meaningful turnaround,” she said. “We expect the trade cycle to stage a turnaround no earlier than Q4 2023.”
EnterpriseSG flagged that lower expected oil prices this year could also weigh on the country’s trade.
Still, some economists were slightly more optimistic.
DBS economist Chua Han Teng noted semiconductors’ sequential improvements up to June. This, along with the improved business sentiment, medium-term optimism on artificial intelligence-related chips, and the possible narrowing and stabilisation of electronics shipments’ decline could mean a “fragile” recovery in H2, he said. RHB senior economist Barnabas Gan agreed: “NODX electronics have continued to trend higher, while the global semiconductor sales index is showing early signs of bottoming out.”
While NODX and manufacturing’s overall momentum has slowed in the recent readings, he believes “it is temporal, given the ongoing global recovery prints seen in the developed economies and parts of Asia”.
ANZ head of Asia research Khoon Goh said the forecast downgrades were “no surprise” given H1’s trade performance. Resilient growth in the US was not enough to offset weak exports to other major trading partners, he said.
But he highlighted signs that “we may be close to the bottom of the export cycle”. On top of global semiconductor sales’ four straight months of growth, world container throughput has been recovering, an indication that global trade is starting to improve.
“This suggests that we could start to see Singapore’s exports turning around later in Q3,” he said.
Maybank economist Chua Hak Bin agreed that the sharp increase in container throughput as well as total sea cargo handled has led to a “sharp turnaround” in the transport and storage sector, suggesting a pickup in regional trade volumes.
Meanwhile, the turnaround in Singapore’s wholesale trade services sector suggests a pickup in regional trade activity and volumes, he added.
“Falling and lower commodity and goods prices are camouflaging the strength and pickup in regional trade activity and volumes,” said Chua. “We have to distinguish the volume and price effects which are driving exports and trade in opposite directions.”
He believes that “the manufacturing and electronics downturn is past its worst”.
Singapore’s exports may benefit from the US manufacturing investment and construction boom later in the year, Chua added. China’s reopening has fallen short of expectations, but will likely provide “some small boost” to trade and exports, he added.
OCBC chief economist Selena Ling agreed that China’s trade and growth prospects have disappointed of late, and China and Hong Kong’s positive contributions to June’s NODX are not likely to be sustainable.
However, she added: “But the worst is probably over. China is stepping up policy stimulus, and major central banks are either on hold or nearing the peak of their rate-tightening cycle.”
NODX dropped 13.4 per cent year on year in Q2 of 2023, extending the previous quarter’s 16.1 per cent decline.
Both electronic and non-electronic NODX declined in Q2. Electronic NODX fell 22.1 per cent, with integrated circuits, PCs and parts of PCs contributing most to the fall. Non-electronic NODX, meanwhile, fell 10.7 per cent. The drop was led by petrochemicals, primary chemicals and specialised machinery.
NODX to Singapore’s top markets declined as a whole in Q2, with Malaysia, Taiwan and Indonesia being the biggest contributors.
However, on a seasonally adjusted quarter-on-quarter basis, Q2 NODX grew by 2.3 per cent, reversing from Q1’s 3.2 per cent contraction.
Total merchandise trade fell 18.7 per cent on the year in Q2, after it posted a 7.8 per cent decline in the preceding quarter. Oil trade slipped 30.9 per cent in Q2, following the flat reading in Q1. Non-oil trade declined by 15.3 per cent, extending the 9.6 per cent drop recorded in Q1.
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