Economists see light at the end of the tunnel as Singapore exports extend slump

Amala Balakrishner

SINGAPORE (Nov 19): Economists are mixed on prospects of a turnaround in Singapore’s economy, after non-oil domestic exports (NODX) slumped for the eighth consecutive month in October.

Official figures released by trade agency Enterprise Singapore on Nov 18 pointed to a 12.3% y-o-y drop in October – weaker than the 8.1% decline in the previous month and worse than consensus expectations of a 10.4% contraction.

The latest drop was mainly due to the high base from a year ago, and comes on the back of lower electronic and non-electronic exports fueled by the tensions between the US and China.

See: Singapore exports retreat for eighth straight month, miss estimates with 12.3% drop in October

“The only bright spot for NODX in October was Taiwan,” says CGS-CIMB Research’s lead economist Michelle Chia in a note on Nov 18. “NODX deliveries to all top export markets dropped in October except for Taiwan (which registered 7.0% y-o-y growth).”

In contrast, exports to Japan, China and Indonesia saw the most pronounced decelerations, falling 39.5%, 5.5%, and 15.5% respectively.

The way Chia sees it, the prospects for Singapore’s economy to recover are “modest”.

“For Singapore’s small and highly open economy, the prognosis for recovery is cautious, as reflected by our tepid GDP growth projections at 0.5% in 2019 and 1.5% in 2020,” Chia says.

The economist agrees that how Singapore’s NODX figures move are dependent on how the US-China trade war pans out.

However, she cautions that even if a deal is reached, it “may not spur broad-based improvements in investments as long as overarching differences in China’s industrial policy are unsettled”.

On the other hand, economists at Maybank Kim Eng Research and RHB Group Research are more optimistic that the worst might soon be over for Singapore’s economy.

Economists at RHB agree that exports are unlikely to bounce back quickly, especially due to continued weakness in electronic exports.

“The NODX slump seen at the beginning of the final quarter reinforces our view that such exports are unlikely to post a quick turnaround amidst the global economic slowdown. With electronic exports falling for the 11th consecutive month in October, we believe the weakness in the sector is likely to persist,” RHB says.

However, RHB continue to believe that NODX growth will see a “slight recovery” in 2020. RHB forecasts a sharp 10% decline in NODX this year, before improving to a more moderate 2% contraction in 2020.

“We think manufacturing and exports will recover at a gradual pace, as the tariff shock dissipates. A partial US-China trade deal would help reduce uncertainty and spark some modest recovery in capex spending and trade in 2020,” says Maybank’s lead analyst Chua Hak Bin in a Nov 18 report.

Chua expects a “significant” upgrade in the city state’s final 3Q GDP to +0.8% – up from the flash estimate of +0.1% – on the back of better than expected figures for manufacturing.

“Manufacturing will likely emerge out of recession in 2020,” Chua says, as he forecasts GDP growth at +0.9% in 2019 and +1.6% in 2020.