Singapore’s non-oil domestic exports (NODX) contracted for the second straight month at -14.6% y-o-y in November.
According to UOB’s global economics and market research team led by Suan Teck Kin, the reading came in worse than expected, below the team’s call of -11.8% and more than twice the Bloomberg survey of -6.5%.
On a m-o-m basis, Singapore’s NODX fell by 9.2% in November to $14.3 billion, making this the fourth consecutive m-o-m fall and the longest stretch since end-2017 and early-2018, UOB points out.
According to Enterprise Singapore (ESG), the drop in Singapore’s November NODX was due to the high base from a year ago.
Both electronics and non-electronics declined on a y-o-y and m-o-m basis.
The 20.2% y-o-y drop in electronics NODX was led by the decline of integrated circuits (ICs), disk media products and parts of personal computers (PCs), which contracted by 23.8%, 59.8% and 27.5% respectively.
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Meanwhile, the 12.8% y-o-y drop in non-electronics NODX was led by non-monetary gold (-56.3%), pharmaceuticals (-25.5%) and primary chemicals (-54.1%).
“A trend of concern is the continued declines in nominal values of NODX since the second half of 2022, to the extent that the average value of NODX per month in the September-November 2022 period came to just $15.3 billion,” the team writes. “This figure is 12% lower than the monthly average of $17.4 billion in the first eight months of 2022 and 5% lower than the average of $16.1 billion in 2021.”
“There is a clear down trend in the NODX value after the ‘boom’ in exports in 2021 and early 2022, and it appears that NODX values could head towards the monthly average of $14.4 billion seen in the 2018-2020 period, as external demand weakens with tightened monetary policies globally as well as rising concerns over economic recessions especially in developed markets such as the US and Europe,” the team adds.
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On the dip in electronics NODX, the team notes that monthly values of IC exports have been running at the $2 billion pace from August 2021 to August before turning lower.
“This suggests that semiconductor downturn is at a nascent stage and may extend further in the months ahead,” says UOB.
On non-electronics NODX, UOB notes that while the declines in pharmaceuticals’ value stabilized in November and there were some healthy improvements in exports values in the electrical machinery/circuits segments, the formidable base effect means that non-electronics NODX will be faced with negative y-o-y readings in the next several months.
In November, NODX to the top 10 markets declined as a whole, though NODX to the EU 27, Japan and the US rose. The largest contributors to the decline in NODX were China (-31.2%), Hong Kong (-41.0%) and Malaysia (-12.9%).
To the UOB team, the decline is another sign that “external demand is weakening progressively as global central banks tightened their monetary policies and impacting demand along the way”.
NODX to emerging markets contracted by 30.3% in November, after the 0.6% decrease in October 2022. The decline in NODX to emerging markets was mainly due to CLMV (-56.2%), South Asia (-18.0%) and Latin America (-42.4%).
CLMV stands for Cambodia, Laos, Myanmar, and Vietnam.
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To this end, the team at UOB has kept its full-year NODX growth forecast for 2022 at 4% even though it expects to see another y-o-y decline in December if the current trend persists.
“It should also be noted that high base effect will continue to work against the NODX going into early 2023,” the team writes.
“The worsening electronics performance, and increasingly weaker demand from more major export destinations, especially China, are clearly weighing negatively on NODX momentum and manufacturing demand. We continue to expect global demand to head towards a downturn on the back of more aggressive monetary policy tightening and worries about economic recessions in the developed markets,” it adds.
RHB Group Research analyst Shekhar Jaiswal is expecting Singapore's NODX softness to persist in the 1H2023.
"Some factors that may hamper exports and manufacturing activities will likely be seen from the relatively expensive SGD-Asia dynamic and higher domestic interest rates that may cap net export momentum and dissuade investor and business appetite," he writes.
"Due to Singapore's trade-dependent structure, the decrease in the NODX momentum may also drag the overall manufacturing outlook in the early part of 2023," he adds.
In 2023, the RHB team has forecasted Singapore's GDP to grow at 3.0%. " Although it is not our base case, the balance of risks is tilted towards a technical recession in 2023, which will likely be short, shallow, and orderly. We are more bullish than the consensus (1.8% growth in 2023) and the government’s forecasts of 0.5%-2.5% GDP growth in 2023."
