As Singapore’s non-oil domestic exports (NODX) for March declined for the second straight month, most analysts are keeping their estimates for the year unchanged.
March’s NODX growth of 7.7% y-o-y, however, stood above well above Bloomberg’s median forecasts of 1.6% y-o-y.
The month’s NODX has also brought NODX growth for the 1Q2022 to 11.4% y-o-y, surpassing the NODX growth of 9.6% y-o-y in the corresponding period the year before.
Maybank Securities analysts Chua Hak Bin and Lee Ju Ye are keeping their growth forecast for Singapore’s non-oil domestic exports (NODX) unchanged at 4% to 6% in 2022 even as the outlook is currently clouded by the Russo-Ukraine war and China’s lockdowns.
“The World Trade Organization (WTO) recently cut its global trade growth forecast to +3% (from +4.7%) due to the ‘double whammy’ of the pandemic and the war that has disrupted supply chains, raised inflationary pressures, and lowered expectations for output and trade growth. Global PMI dipped in March to the lowest level since Oct 2020, mainly dragged down by China and the slump in EU,” the analysts write in their April 18 report.
Chua and Lee are also keeping their GDP growth forecast unchanged at 2.8% for 2022, below the government’s 3% to 5% forecast range. They note that Singapore’s trade-related services such as wholesale and transportation & storage softened in the 1Q2022 as trade volumes retreated. However, consumer-facing services such as retail trade, accommodation and food services may mitigate the weaker manufacturing and trade figures in the coming quarters on the back of the reopening of borders.
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OCBC’s chief economist and head of treasury research & strategy, Selena Ling, has also kept her 2022 NODX growth forecast unchanged at 4% to 8%, although she says that the figure may “face some downside risks”.
Factors that may lead to such risks include the ongoing geopolitical tensions, which continue to disrupt supply chains and disrupt growth prospects, as well as China’s inability to achieve its “rather ambitious” 2022 growth target of around 5.5%, says Ling.
“S’pore’s NODX growth base in 2021 is also relatively high at 12.1% y-o-y,” she adds.
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To Ling, Singapore’s March NODX stood above her estimates despite the m-o-m drop.
The growth, which came in spite of the Omicron surge earlier in 2022, suggests that NODX growth is “off to a good start” despite the twin headwinds of inflation and the likely slowdown in China’s demand on the back of the Covid-related lockdowns, she says.
“While China’s 1Q22 GDP growth beat market expectations at 4.8% y-o-y (1.3% q-o-q seasonally adjusted basis), recall that the lockdowns happened in late March, and the impact on consumption and domestic supply chains could be felt more clearly in April onwards. While China has eased monetary policy via the latest reserve requirement ratio (RRR) cut, this will also not be a panacea to address the supply bottleneck,” she adds.
“More generally, the World Trade Organisation (WTO) has pared its 2022 global merchandise trade growth forecast from 4.7% to 2.4%-3.0% amid worries that the Ukraine war may potentially splinter global commerce amid various downside risks including trade disruptions, food insecurity and a possible virus resurgence. The International Monetary Fund (IMF) is also signalling a significant downgrade to its 2022 global growth projection due to inflation, pandemic and the Ukraine war, at the start of the IMF-World Bank spring meetings,” she continues.
During the month, NODX to seven of Singapore’s top 10 markets expanded, led by the US, Malaysia, Japan and the EU27. China, notably, saw a significant moderation from the double-digit NODX growth before to 4.8% y-o-y in March.
While NODX to Thailand shrank for the third consecutive month, Ling sees that the re-opening of the Thai economy to fully vaccinated visitors from April 1 along with the many relaxed border controls in Asean, may bring about some demand recovery within the region.
To this end, Ling is pencilling in a moderated growth rate of 7.9% y-o-y for 2Q2022, with electronic exports registering a slowdown in growth momentum.
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“As we had flagged [in February], a degree of caution may be warranted in the coming months due to the Ukraine-Russian conflict which could potentially disrupt many global supply chains due to the energy, commodity and food products produced and exported by these two countries, in addition to driving inflation higher for longer,” she says.
UOB’s senior economist Alvin Liew is also keeping his NODX growth outlook of 2.0% in 2022.
Like OCBC’s Ling, Liew is cautious about the downside risks from the ongoing events in the world.
“Any exacerbation of geopolitical tensions and worsening Covid-19 developments in China for the near term, [are] likely [to] depress trade demand especially in Asia and another round of temporary supply chain disruption due to raw material shortages,” Liew writes in his note dated April 18.
“As we had noted in the previous report [in February], Singapore’s direct trade exposure to Russia is small, where the trade in goods with Russia amounted to $5 billion in 2021 (or 0.4% of Singapore’s total trade), but the area of concern is the potential second-order trade impact to Russia’s top trading partners, including China and Europe, which may in turn negatively affect Singapore’s trade outlook.
“Meanwhile, the widespread lockdowns in China’s key cities will have an impact on China’s domestic demand which in turn, will also impact on Singapore’s exports to China. Singapore’s exports to China accounted for 14.8% of total exports in 2021, followed by Europe at 9.3%, US at 8.4% and Japan at 4.0%,” he adds.
CGS-CIMB Research economists Terence Lee and Nazmi Idrus expect electronic NODX to see “signs of difficulty” emerging in 2H2022 despite the double-digit growth y-o-y for 15 of the last 16 months.
This is due to the “constellation of headwinds” such as the rising interest rates, soaring inflation from commodity prices and supply chain disruptions from China’s zero Covid-19 policy and the Ukraine war. These factors, according to Lee and Idrus, could negatively impact semiconductor sales and their demand.
JP Morgan economists Ngai Jin Tik and Ong Sin Beng are expecting the medium-term improvement in NODX to remain “intact” on the back of the economic reopening in the region.
“However, spillovers from the Russia-Ukraine crisis and ongoing mobility restrictions in China may weigh on external demand in the near term,” the economists say.
