Singapore Export Drop Adds to Regional Slowdown Signs: EconomySharon Chen and Kenneth Foo
Singapore’s exports fell more than economists estimated in May as manufacturers shipped fewer electronics, adding to signs of a regional slowdown that has prompted the World Bank to cut some growth forecasts.
Non-oil domestic exports slid 4.6 percent from a year earlier, after falling 1 percent in April, the trade promotion agency said in a statement today. The median of 10 estimates in a Bloomberg News survey was for a 0.2 percent drop. Shipments of electronics dropped 13.2 percent from a year ago, extending the slump to a 10th month.
The World Bank this month cut its global growth forecast for 2013 after emerging markets from China to Brazil slowed more than projected, weakening prospects for Singapore’s trade-dependent economy. Asian stocks outside Japan last week fell for a fifth straight period, the longest streak of losses in two years, while the Hang Seng China Enterprises Index dropped a record 12 straight days through June 14 amid concern growth is slowing in the world’s No. 2 economy.
“We do expect soft global demand to keep a lid on export growth this year for the Asia region,” said Michael Wan, a Singapore-based economist at Credit Suisse Group AG. “In addition, exports of the commodity-focused countries, such as Indonesia and Malaysia, will also be affected by China’s moderation to more sustainable growth levels.”
The World Bank predicts the global economy will expand 2.2 percent this year, less than a January forecast for 2.4 percent growth. It lowered its projection for developing economies and sees the euro region’s gross domestic product shrinking 0.6 percent. The International Monetary Fund last week lowered its forecast for U.S. growth for 2014.
The Singapore dollar fell 0.2 percent to S$1.2535 against the U.S. currency as of 2:06 p.m. local time. The currency has weakened almost 3 percent in the past six months even as the central bank maintained a policy of allowing gradual gains in its dollar. The depreciation probably won’t help exports, said Song Seng Wun, an economist at CIMB Research Pte in Singapore.
“As far as Singapore’s manufactured goods are concerned, it’s more about end demand than the exchange rate,” Song said. “If there’s no demand, no matter how much gain you get from the currency depreciation, it hardly makes a difference in terms of whether the Singapore dollar is stronger or weaker” in the short or medium term, he said.
Located at the southern end of the 600-mile (965-kilometer) Malacca Strait and home to one of the world’s busiest container ports, Singapore has remained vulnerable to fluctuations in overseas demand for manufactured goods. The government has boosted the financial services and tourism industries to become less reliant on exports.
“The risks Singapore faces are always external,” said Wai Ho Leong, a senior regional economist at Barclays Plc in Singapore. “The external outlook is still fragile, particularly when we’re not well tapped into the smartphone boom that’s going on in North Asia.”
Sales by Samsung Electronics Co., which captured a third of the global smartphone market in the first quarter, have helped make South Korea’s trade more resilient. The nation’s exports increased 3.2 percent in May from a year earlier on the strength in smartphone sales, faster than a 0.4 percent gain in April.
The slide in Singapore’s electronics shipments by companies such as Venture Corp. is the longest string of losses since 2009, and comes even as output of such goods rose in April. Analysts have lowered their estimate for the island’s export expansion this year to 2.5 percent from 4 percent, according to a survey by the central bank this month.
“There could be a bit of inventory buildup in electronics exporters,” said Wan of Credit Suisse. “They are producing in anticipation of future demand, and there’s a risk that this demand might not be met in the coming months.”
Elsewhere in Asia today, India kept its repurchase rate unchanged after lowering it for three straight meetings. Data to be reported in Europe include the region’s April trade balance, while the Federal Reserve Bank of New York will release its Empire State index.
Singapore’s non-electronics shipments, which include petrochemicals and pharmaceuticals, rose 0.2 percent last month from the previous year. Petrochemical exports climbed 3.9 percent, while pharmaceutical shipments increased 19.9 percent.
The government forecasts exports will rise 2 percent to 4 percent this year and predicts economic growth of 1 percent to 3 percent. Singapore’s gross domestic product rose an annualized 1.8 percent in the three months through March as services and construction strengthened.
Non-oil exports slipped a seasonally-adjusted 1.1 percent last month from April, when they gained 1.1 percent, today’s report showed.