Rajiv Biswas, Asia-Pacific chief economist for IHS Global Insight
Key Points:
- Singapore’s non-oil domestic exports slumped by 12.0% year-on-year (y/y) in October, considerably worse than market expectations, as exports of both electronic and non-electronic products showed large declines.
- Non-oil domestic exports also recorded a large decline compared to the previous month, falling by 3.7% month-on-month.
- Electronics NODX fell by 6.0% y/y in October, following a 6.6% y/y contraction the previous month.
- Non-electronics NODX contracted even more sharply, down 14.6% y/y in October, after a fall of 4.6% y/y the previous month. Sectors that showed the largest declines were pharmaceuticals, which contracted by a massive 47% y/y, petrochemicals, which was down 7.0% y/y and civil engineering, which fell by 40.7% y/y.
- Non-oil domestic exports to seven out of the top ten export markets showed declines, with the largest falls being to the EU (-28.6% y/y) and Japan (-19.9% y/y). Exports to some of the largest ASEAN markets also fell, with NODX to Indonesia down 13.1% y/y and NODX to Malaysia declining by 7.5% y/y.
- NODX to all emerging markets was down 37.1% y/y, reflecting continued weak economic conditions in global emerging markets. IHS Global Insight estimates that overall GDP growth in emerging markets will be 3.9% in 2016, far below the 7.3% and 6.3% pace of GDP growth recorded in 2010 and 2011.
- Singapore’s NODX to Latin America fell by 47.5% y/y in October, as Latin America experiences recessionary conditions. IHS Global Insight estimates that Latin American GDP growth will contract by 1.6% in 2016, with severe recessionary conditions continuing in Brazil.
Outlook:
The latest Singapore export data continues to reflect significant headwinds to Singapore’s GDP growth outlook due to weak external demand from key Asian markets, including China, Japan and ASEAN. Singapore’s exports to emerging markets have shown a severe contraction in October, reflecting continued weak economic conditions in many emerging markets worldwide. While economic conditions in emerging markets are showing signs of stabilization, only gradual improvement is expected in 2017 with IHS Global Insight forecasting that emerging markets GDP growth will pick up from 3.9% in 2016 to 4.5% in 2017.
The near-term outlook for Singapore’s economy remains constrained by the impact of the global trade slowdown, with Asian trade flows having been impacted by weak external demand conditions, notably due to moderating Chinese economic growth and the transmission effects to the Asian manufacturing supply chain.
In its semi-annual Monetary Policy Statement, the Monetary Authority of Singapore (MAS) has projected that GDP growth will slow in H2, 2016 compared the first half of the year, with annual GDP growth expected to come in at the lower end of the 1% to 2% GDP forecast range for calendar 2016. The advance estimate for GDP growth in Q3, 2016 showed a 4.1% contraction on a quarter-on-quarter seasonally adjusted annualized basis. The MAS expects Singapore’s GDP growth to be only slightly higher in 2017, with external demand conditions continuing to create headwinds to Singapore’s export sector outlook.