Singapore’s exports fell the most since 2009 in July as sales of electronics slumped, adding to concern the city state may experience a recession as global economic risks grow.
Non-oil domestic exports declined 2.8 percent from a year earlier, after a revised 1 percent gain in June, the island’s trade promotion agency said in a statement today. The slide was the largest since the 6.2 percent drop in October 2009. The median of 12 estimates in a Bloomberg News survey was for an increase of 4.6 percent.
A faltering U.S. recovery and the European debt crisis have clouded the outlook for export-fueled Asian expansion, even as the region fights price pressures. The weakness in shipments abroad raises the odds of a “technical” recession in Singapore, CIMB Research Pte and Bank of America Merrill Lynch said today.
“We could see a real risk of Singapore, being one of the most export-oriented economies on this planet next to Hong Kong, experiencing a technical economic contraction,” said Song Seng-Wun, an economist at CIMB Research in Singapore who has analyzed Asian economies for more than two decades. “It could be a sign of things to come for the other economies around the region.”
A technical recession is usually defined as two consecutive quarters of declines in gross domestic product.
Electronics shipments by companies such as contract manufacturer Venture Corp. dropped 16.9 percent in July from a year earlier, after declining 17.2 percent the previous month.
Non-electronics shipments, which include petrochemicals and pharmaceuticals, increased 5.9 percent. Pharmaceutical shipments surged 48.5 percent after advancing 1.1 percent in June.
The performance of Singapore’s pharmaceutical industry is volatile as production swings by companies such as Sanofi-Aventis SA can cause industrial output to fluctuate from month to month. Drug companies sometimes shut plants for cleaning before making different products.
Singapore’s non-oil exports fell a seasonally adjusted 2.3 percent last month from June, when they declined a revised 4.1 percent, today’s report showed.
The city state’s gross domestic product shrank an annualized 6.5 percent in the second quarter from the previous three months, when it surged 27.2 percent.
Singapore’s central bank may maintain a stance of allowing modest appreciation in the local dollar in October because the threat from inflation remains, Song said. The island uses the exchange rate as its main tool to manage monetary policy.
Still, “they will be like other central banks where they have put further tightening moves on hold,” he said. “Going forward, the Singapore dollar rate of appreciation may slow down from the kind of pace we saw in the first half.”
The currency was little changed at S$1.2044 a dollar at 10:25 a.m. today.
Singapore on Aug. 10 cut its forecast for export growth in 2011, saying non-oil domestic exports will probably climb 6 percent to 7 percent, less than a previous prediction of 8 percent to 10 percent.