Singapore now expects non-oil domestic exports to shrink by 8 per cent to 10 per cent. - ST FILE
SINGAPORE (The Straits Times/Asia News Network): Singapore cut its 2023 growth forecasts for key non-oil domestic exports (Nodx) and total merchandise trade, which includes oil, amid a sharp downturn in the global electronics sector that has weighed on manufacturing in Asian economies.
Nodx is now expected to shrink by 8 per cent to 10 per cent, and total merchandise trade to contract by 6 per cent to 8 per cent, dragged down by the manufacturing down cycle and lower oil prices, Enterprise Singapore (EnterpriseSG) said on Thursday (May 25).
This pales against its previous forecast of minus 2 per cent to 0 per cent growth for both trade measures.
The downgrade comes after both Nodx and total merchandise trade came in worse than expected in the first quarter.
Nodx tumbled 16.2 per cent year on year, extending the 14 per cent decline in the fourth quarter. Meanwhile, total merchandise trade fell by 7.8 per cent, sharper than the 1 per cent dip previously.
In tandem, Singapore’s economy cooled in the first quarter and is forecast to grow by 0.5 per cent to 2.5 per cent in 2023, likely around the midpoint of the range.
OCBC Bank chief economist Selena Ling said Nodx should improve somewhat in the second half of 2023.
“There is a risk that the global electronics demand recovery may be postponed towards the latter part of the year or even early 2024,” she said, noting that United States chipmaker Nvidia’s bullish sales forecast on Wednesday shines a spotlight on possible growth in demand for computer power in the generative artificial intelligence industry.
China’s reopening is also likely to pick up pace in the second half of 2023 even though current economic data suggests that the recovery trajectory is uneven, said Ling, adding that Nodx might grow again at a modest pace by the fourth quarter.
For the first quarter, the picture was gloomy for Nodx. Electronics slid year on year for the third straight quarter, while non-electronics exports dropped for the second consecutive quarter.
Electronics, which made up 20 per cent of Nodx, contracted 25.2 per cent, worse than the 15.9 per cent drop in the fourth quarter. Integrated circuits, disk media products and parts of PCs contributed the most to the decline.
Non-electronics shrank 13.6 per cent, owing to lower exports of non-monetary gold, petrochemicals and structures of ships and boats. The decline was slightly sharper than the 13.4 per cent fall in the fourth quarter.
Nodx to Singapore’s top markets, except Japan, fell in the first quarter. China, Hong Kong and Taiwan accounted for most of the decline.
EnterpriseSG said: “Manufacturing output slowed in the first quarter, particularly among Asian economies more exposed to the global electronics down cycle. Further weakness is expected as new orders stayed in the contractionary region for key exports such as electronics and chemicals.
“Prices of these key exports had also started to correct from their peak in 2022.”
Citing International Monetary Fund projections that the global economy will grow by a slower 2.8 per cent in 2023, down from a previous forecast of 2.9 per cent, EnterpriseSG said: “Most of Singapore’s key trade partners, including the US, euro zone and Asean-5, are expected to grow at a slower pace in 2023, except China and Japan.”
The World Trade Organisation has projected “subdued” global merchandise trade, with growth slowing to 1.7 per cent from 2022’s 2.7 per cent due to headwinds such as the war in Ukraine, inflation and monetary tightening.
Singapore’s oil trade, which had driven 44 per cent of total trade growth in 2022, barely contributed to export growth in the first quarter due to lower oil prices compared with last year, said EnterpriseSG.
It also said the outlook for petrochemicals remains sluggish due to excess global supply and planned plant maintenance shutdowns.
Total merchandise trade, which includes total exports and total imports, came in at $297.9 billion in the first quarter, down from $319.4 billion in the fourth quarter and $323 billion a year ago.
