Slow going: A tug boat pulls a ship transporting liquefied petroleum gas near Singapore. The country’s non-oil domestic exports rose 1% in November. — AFP
SINGAPORE: With the end of the biggest global inflationary surge in decades and a turn in the electronics cycle in sight, Singapore’s economy looks set to stage a comeback in 2024 – the Year of the Dragon on the Chinese calendar.
But the much-anticipated export-driven recovery is likely to be modest, amid subdued demand from consumers in key markets such as the United States, European Union and China, where economic growth will remain subpar for most of the year.
“Not a fire-breathing dragon then,” said Frederic Neumann, chief Asia economist and co-head of global research at HSBC.
Indeed, new risks to the global supply chain are emerging, with shipping in the Red Sea having ground to a halt as violence linked to the Israel-Hamas war threatens to undermine the global economy.
Three container ships came under attack in the space of about a day late last week, prompting owners including MSC Mediterranean Shipping, A.P. Moller-Maersk and CMA CGM – the top three shippers in the world – to announce plans to stay away.
Some ships from Europe to Asia are being rerouted around southern Africa at higher freight rates instead of going through the Suez Canal, a critical maritime trade route in the Red Sea.
On Dec 19, global oil prices jumped after energy giant BP said it had stopped sending tankers through the Red Sea.
Still, Neumann’s allusion to the dragon had been written just days after the US central bank gave its strongest signal yet of the possibility of bringing interest rates down from their four-decade highs – levels that have been crimping growth and consumer demand not only in the United States but also worldwide.
It was a message of hope, or as he put it: “But altogether a dragon with more swagger.”
The latest developments bring hope but with a dose of caution.
The Federal Reserve’s (Fed) commentary after its meeting last week raised hopes of a rate cut as early as March. But other major central banks – including the European Central Bank and the Bank of England – and some Fed officials themselves pushed back against those expectations.
That resistance showed rate cuts in 2024 will not arrive in time to save major economies from the pain of slower growth and higher unemployment, which will weigh on consumer demand and by extension hit the outlook of Asia’s export-driven economies such as Singapore.
The republic’s latest export data, too, seems to signal a path to recovery but of a fragile and bumpy variety.
Non-oil domestic exports or Nodx in November rose 1% from a low base a year ago, snapping 13-straight months of decline, data from trade agency Enterprise Singapore released on Dec 18 showed.
But electronics exports shrank for the 16th-straight month, falling 12.7% year-on-year in November – much worse than the October drop of 5.6%.
Looking at overall exports more closely, on a seasonally adjusted basis, real exports – which subtract the impact of inflation on prices – fell by 2.2% month-on-month in November, breaking a two-month upswing that saw export volumes rise over 10% from August to October, said Alex Holmes, lead Asia economist at London-based research firm Oxford Economics.
There has been some evidence of a turnaround in global semiconductor sales from electronics powerhouses such as Taiwan and South Korea in recent months, but most analysts believe that is because of a drawdown in the massive inventory built over 2021 and early 2022.
Chetan Ahya, chief Asia economist at Morgan Stanley, said high frequency data showed Asia’s real exports have ticked up from the lows but lack further impetus to grow strongly. — The Straits Times/ANN
