Singapore’s non-oil domestic exports (NODX) for 2023 is on track to see its worst annual performance since 2001, says Selena Ling, chief economist and head of global markets research and strategy at Oversea-Chinese Banking Corporation (OCBC).
Though the republic’s NODX expanded by 1.0% y-o-y in November after 13 months of contractions, Ling expects its annual NODX to come in at -12.5%, at the lower end of Enterprise Singapore’s range of -12.5% to -12.0%.
“This assumes that December NODX will recover further to 5.9% y-o-y,” Ling writes.
Meanwhile, UOB’s senior economist Alvin Liew and associate economist Jester Koh expect Singapore’s full-year NODX to contract by -12.6%, down from their previous estimate of -12.5%, and lower than Enterprise Singapore’s expected range.
While Singapore’s November NODX stood behind Bloomberg’s consensus of a 1.5% growth y-o-y, Liew and Koh were expecting a mild contraction of -0.9% y-o-y for the month.
“The question now is whether this represents a temporary or extended pause in the external sector's recent better trend. We suspect it will be the latter,” says Oxford economics’ lead Asia economist Alex Holmes. “A renewed growth spurt looks unlikely against the background of waning of global growth, with advanced economies growing sluggishly - or stagnating - as the adverse impact of past policy tightening builds.”
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In November, electronic NODX declined by 12.7% y-o-y with integrated circuits (ICs), personal computers (PCs) and diodes & transistors contributing the most to the drop at 18.0%, 47.8% and 13.6% respectively. Non-electronic NODX grew by 5.2% y-o-y thanks to pharmaceuticals (+118.9%), non-monetary gold (+106.5%) and miscellaneous manufactured articles (+39.1%).
NODX to the top markets fell on the whole in November, although NODX to the US, China, Thailand and Hong Kong rose. The largest contributors to the decline in NODX were Taiwan (-40.0%), the EU 27 (-21.7%) and Indonesia (-23.6%).
To UOB’s Liew and Koh, November’s numbers reflect a possible bottoming in the electronics trade cycle with recovery in the next few quarters supported by base effects.
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“On a six-month moving average y-o-y basis, electronics NODX exhibited incrementally narrower contractions (November: -16.0% y-o-y, October: - 18.4%, September: -21.2%, August: -22.7%) from the weakest reading observed in May 2023 (-24.0%),” they say.
“In addition, export performance in the electronics / semiconductor powerhouses (South Korea and Taiwan) continued to record improvements, as South Korea exports saw an expansion of 7.7% y-o-y in November (October: 5.0%) while Taiwan’s exports turned positive in Nov to 3.8% y-o-y, a reversal from the -4.5% y-o-y contraction seen in Oct. Meanwhile, Singapore’s November electronics purchasing manager’s index (PMI) turned positive for the first time since July 2022, with a reading above the 50-threshold at 50.1 (October: 49.9),” they add.
OCBC’s Ling, however, sees that the prognosis for electronic NODX remains “soft” at this point. Year-to-date (ytd), electronic NODX has fallen by some 19.9% y-o-y and is expected to come in at -19.1% y-o-y for the full year. If this materialises, this will become the sector’s worst annual decline since 2019.
2024 outlook
Going into 2024, Ling is more upbeat, as she sees that an expected turnaround in global electronics demand is still in the pipeline for 2024.
“Generative AI may provide some tailwinds into next year, but a recovery in PC and 5G smartphone demand will be pivotal to bolster the industry outlook after an extended downcycle,” she says.
Her NODX forecast is between 4% to 6% for 2024, assuming a stabilisation in global demand conditions. “[This is] as the global monetary policy cycle pivots to an easing bias and assuming that geopolitical tensions do not worsen.”
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UOB’s Liew and Koh expect 2024’s NODX to expand by 6.0%, above the official range of 2.0% to 4.0%.
“In 2024, recovery in NODX will largely be driven by base effects given the sharp double digits y-o-y decline seen from November 2022 to September 2023 but headwinds persist given the still weak external backdrop on tight financial conditions stemming from an elevated interest rate environment,” they say.
Oxford Economics’ Holmes is less positive.
“After a period of resilience, led by the US, global growth looks to be slowing and we think it will be very subdued over the first half of 2024 as the adverse impact of past policy tightening bites,” he says. “Against that backdrop, the global trade on which Singapore depends is unlikely to expand at a fast pace. As such, we don't expect exports to be a big boost to GDP next year.”
