Maybank Research analysts Chua Hak Bin and Lee Ju Ye have trimmed their GDP forecasts for Singapore to 3.8% and 2.5% in FY2022 and FY2023 respectively, highlighting that rising commodity prices caused by the crisis in Ukraine will have an uneven impact across Asean countries.
In a March 8 report, the analysts wrote that GDP forecasts for Singapore, Thailand, Philippines and Vietnam face relatively more downside risks than commodity exporters Malaysia and Indonesia.
The analysts had also increased their CPI inflation forecasts for Singapore to 3.6% and 1.8% in FY2022 and FY2023 respectively, adding that the magnitude of the adjustments will depend on the duration of the Ukraine war. The adjustments are also dependent on the breadth and severity of the sanctions, as well as the extent of the commodity crunch and price increases.
In terms of trade, Russia accounts for only 0.4% of Asean-6’s total exports and 0.6% of total imports, the analysts note. In value terms, Singapore imported the most from Russia at US$3.3 billion ($4.5 billion).
Singapore’ exports to Russia include navigation equipment (16.5%), integrated circuits (4.7%), office machine parts (4.2%), cocoa butter (3.2%) and packaged medicaments (3.1%). Meanwhile, its imports from Russia include refined petroleum (76.1%), crude petroleum (11%), nitrogenous fertilisers (3.8%), raw nickel (3.6%) and coal tar oil (1.1%).
Russia accounts for a relatively small share of 1.2% of exported Asean value-added (VA), lower than that of all major North Asian and Western economies. Asean-6’s exposure to European Union (EU) final demand, however, is much larger, boding significant risks for their economies if the EU were to fall into a recession, the analysts note.
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“Singapore, Vietnam and Thailand have the highest exposures – their VA embodied in EU final demand is at 7.7%, 5.4% and 4.3% of GDP respectively. This implies that the impact on Singapore’s nominal GDP stemming from export links alone would be 0.07% for every 1% decline in EU final demand,” the analysts add.
The conflict will also dampen Europe-Asia travel, further delaying tourism recovery — European tourists account for 11.2% of Singapore’s share of arrivals in 2019, while Russian tourists only account for 0.4%.
“Airlines from the EU, US and Canada have been banned from Russian airspace in response to their curbs on Russian airlines. While Asian airlines have not been banned, Japan’s JAL and ANA Holdings cancelled all flights to and from Europe on March 3, citing safety concerns.”
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Singapore is the 16th largest investor in Russia (US$4.3 billion) and 8th largest outward direct investment for Russia (US$11.4 million). Locally-listed commodity traders Olam and Wilmar have a stake in Russia’s agriculture business, while GIC and Temasek both have small exposures to Russia at US$200 million and US$300 million respectively.
Changi Airports International had also signed a major deal in 2016 with Russian investment firm Basic Element and RDIF to manage the Vladivostok International Airport.
The war had also contributed to global oil prices spiking to near 8-year highs, with brent crude climbing over US$120 per barrel. Maybank’s oil and gas analysts have raised the average crude oil price forecast to US$100 per barrel, given the tightening oil market and disruption to supplies.
Singapore’s Minister of Trade and Industry Gan Kim Yong had cautioned that inflationary pressures are set to rise further in the near term, especially through the increase in the prices of oil-related items. The analysts note that the government will introduce additional measures to help businesses and households if necessary.
Recently, Singapore has imposed sanctions on four Russian banks, as well as banned exports of electronics, computers, telecommunications, information security and military goods. Citing the Ministry of Trade and Industry, Maybank analysts wrote that Singapore’s trade in goods with Russia was $5 billion in 2021, with top exports to Russia in electronics and apparatus.
Photo: Bloomberg
