The Straits Times, 17 Aug 2022, Weds 3:44 PM
By Adeline Tan
SINGAPORE- Singapore’s key exports saw slower growth last month as shipments of non-electronic products eased, with analysts predicting the momentum will continue to cool in the coming months as the global economic landscape darkens.
Non-oil domestic exports (Nodx) expanded 7 per cent year on year in July, with June’s growth revised down to 8.5 per cent from 9 per cent previously, according to data released by Enterprise Singapore (EnterpriseSG) on Thursday (Aug 17).
Still, July’s Nodx increase beat the 6.4 per cent rise forecast by analysts in a Bloomberg poll. It also marked the 20th straight month of year-on-year Nodx growth.
Electronic shipments rose by 10.3 per cent year on year in July, faster than the 4.1 per cent growth in the previous month. Shipments of integrated circuits (ICs), parts of ICs and disk drives increased by 18.5 per cent, 83.2 per cent, and 110.2 per cent respectively, contributing the most to the growth.
Non-electronic shipments grew 6.1 per cent year on year, less than the 10 per cent rise in June. Specialised machinery, which grew 12.2 per cent, as well as pharmaceuticals and structures of ships and boats contributed the most to the growth.
Nodx to the top 10 markets rose as a whole in July, although shipments to China, Japan, Hong Kong and Thailand declined. The largest contributors to the growth in Nodx were the European Union, Malaysia and Taiwan.
Ms Selena Ling, OCBC Bank’s chief economist and head of treasury research and strategy, said the drop in shipments to the four markets could be a reflection of softening domestic demand conditions in China and Hong Kong due to ongoing Covid-19 restrictions.
Ms Ling added that rising inflation and interest rates will also put pressure on incomes and dampen spending on electronic products such as smartphones.
Barclays senior regional economist Brian Tan said that while electronic exports rose, the exports of non-monetary gold and pharmaceuticals – which tend to be volatile – had likely helped to drive Nodx growth for July.
Ms Ling added that the outlook for pharmaceutical exports, which grew 9 per cent year on year in July, is not a given.
She said: “High vaccination and booster rates have been cited by big pharmaceutical companies as dampening their earnings guidance ahead as more countries pivot to endemicity.”
Total trade also grew over the year in July as both exports and imports rose, EnterpriseSG said. It expanded 31 per cent in July, following 30.8 per cent growth in June.
Mr Alex Holmes, senior Asia economist at Oxford Economics, said Singapore’s export momentum is expected to fade after its recent strong run.
He said: “The bounceback in China’s economy following lockdowns is proving lacklustre. Meanwhile, elevated inflation and tighter policy will weigh on import demand from the rest of the world.”
Last week, EnterpriseSG raised its 2022 trade forecasts on the back of a better-than-expected performance in the second quarter. Nodx is now expected to grow by 5 per cent to 6 per cent this year, from the previous forecast of 3 per cent to 5 per cent. Total merchandise trade is seen expanding 15 per cent to 16 per cent, up from 8 per cent to 10 per cent.
However, with these forecasts in nominal terms, analysts believe that real exports, after stripping out the impact of inflation, have been shrinking through at least the second quarter.
UOB senior economist Alvin Liew said the first seven months of Nodx performance form a strong foundation to achieve 5 per cent full-year growth, even while factoring in a slowdown in the second half of 2022.
China’s economic downturn will also likely be a driver of the expected slowdown, said Mr Barnabas Gan, senior economist at RHB Group.
He said: “Notably, Nodx to developed East Asian economies, including China, Hong Kong and Japan, contracted in July, suggesting that the broad economic weakness in China may continue to weigh on Asia’s trade dynamics.”
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