Exports expected to take a beating as demand from China, US, EU crumbles
TODAY file photo
SINGAPORE — As shipments of locally made goods continue to crumble, IE Singapore on Thursday (Nov 24) slashed the Republic’s exports forecast to reflect an expected contraction of between 5 and 5.5 per cent this year, versus its previous forecast of -3 to -4 per cent.
External demand has remained stubbornly weak, with China, the euro zone and the United States — Singapore’s top three trading partners — importing less from the Republic. Amid fresh uncertainty around global trade sparked by US President-elect Donald Trump’s protectionist policy stance, further risks are in store for Singapore, said analysts.
On a year-on-year basis, non-oil domestic exports (Nodx) shrank by 5.4 per cent in the third quarter, following the previous quarter’s 0.2 per cent decline, as shipments of both electronic and non-electronic products fell. This takes Nodx’s performance for the first nine months to -4.9 per cent.
In terms of geography, exports to eight of Singapore’s top 10 markets fell in the third quarter, except for Hong Kong and South Korea.
The biggest contributors to the year-on-year decrease in the quarter were China, Indonesia and the US. Specifically, Nodx to China declined by 8.2 per cent, following the previous quarter’s drop of 9.1 per cent.
Exports to Indonesia fell by 15.9 per cent, after the second quarter’s -16.3 per cent. And shipments to the US decreased by 7.7 per cent, in contrast to the 2.4 per cent rise in the previous quarter.
ANZ economist Ng Weiwen said: “Capital expenditure in advanced economies turned out to be more subdued than anticipated ... Exports are clearly not out of the woods for Singapore because the US and China are already importing less from the world due to insourcing as they embrace vertical integration domestically … Meanwhile, free trade has scarce political support in this age of populism post-Brexit and ahead of the European elections next year, in addition to potentially restrictive trade policies under the Trump administration.”
Going forward, as the global economy picks up “slightly” and oil prices improve next year, Nodx is likely to fare better, said IE Singapore. It has forecast exports growth to come in at between -1 and 1 per cent next year.
But Permanent Secretary (Trade and Industry) Loh Khum Yean warned: “Political risks and uncertainties have risen, and could in turn lead to greater economic uncertainties. In particular, an increasing backlash against globalisation could further dampen global trade, which is already weak.”
He added that in addition to uncertainties in both the United Kingdom and the euro zone economies caused by Brexit, rising corporate credit levels in China could lead to a spike in debt defaults as the Chinese economy continues to restructure.
Responding to questions from reporters on the potential impact of the US presidential election on Singapore, Mr Loh noted: “The US is the largest economy in the world and it is one of Singapore’s top trading partners; it is also an important source of foreign direct investment for Singapore. The trajectory of the US economy and how it manages its trade relations will therefore affect countries around the world, including Singapore.”
However, Mr Loh also said that it is “too early to speculate” on the impact of the new administration and that much will depend on the policies the administration adopts.
For the July to September period, exports of electronic products shrank 8.6 per cent, extending from the 5.1 per cent contraction in the previous quarter, due to lower shipments of personal computers, personal computer parts and integrated circuits.
Shipments of non-electronic products fell 3.9 per cent, reversing a 1.8 per cent increase in the previous quarter, on lower exports of petrochemicals, structures of ships and boats and civil engineering equipment parts.
