Singapore's bleak outlook mirrors regional slump

No let-up in weak economic conditions across Asia-Pacific any time soon, say economists

Singapore's shrinking trade numbers and bleak economic outlook for the year ahead reflect a regional slump that will not be lifted any time soon, economists said.

If it is any consolation, Singapore will likely not be the worst hit as economic conditions continue to soften across the Asia-Pacific.

China's ongoing economic slowdown has meant that demand for exports has fallen sharply, leading to weak trade numbers for close trading partners such as Taiwan, South Korea, Japan and Singapore.

"North Asia is really the canary in the coalmine," said Barclays economist Leong Wai Ho.

Indeed, Korea is first among the world's major economies to report economic numbers each quarter, so its data is treated by analysts as a gauge of how world trade is doing.

The prognosis is not good.

Korea, which sends a quarter of its exports to China, said last week that exports in the first 20 days of February tumbled over 17 per cent year on year despite longer working days.

Singapore's numbers fit right in with the gloomy regional picture - the economy grew a modest 2 per cent last year, the Ministry of Trade and Industry said yesterday.

Exports dropped 9.9 per cent last month from a year ago, while exports to China plunged 25.2 per cent.

It said on Wednesday its economic growth slid to 2.6 per cent last year, the slowest rate since 2012.

Taiwan has also been feeling the pain of a slowing mainland China, reporting that exports fell 13 per cent last month year on year, as shipments to China sank 19 per cent.

Japan's exports fell 9 per cent in January, with exports to China diving almost 10 per cent.

Singapore's numbers fit right in with the gloomy regional picture - the economy grew a modest 2 per cent last year, the Ministry of Trade and Industry said yesterday.

Exports dropped 9.9 per cent last month from a year ago, while exports to China plunged 25.2 per cent.

"We should expect no pick-up, no let-up in this manufacturing recession any time soon. Things will not magically improve in the second half of the year," warned Mr Leong.

"It's because the weakening demand from China is coming from two fronts - it's cyclical, because of the economic slowdown, but also structural as China is becoming more self-sufficient and producing its own semiconductors."

As a small, open economy, Singapore is being hit hard and will keep feeling the pain, Mr Leong said, but likely not as bad as some others.

"We tend to be the first to get hit as our goods are more expensive, but our electronics industry is smaller than those in Korea and Taiwan."

Closer to home, it's more of a mixed bag. While China's slowdown will have knock-on effects on Asean economies, they are each affected more directly by other factors.

Malaysia, for example, has slashed its outlook for growth this year to between 4 and 4.5 per cent, down from a previous forecast of growth of up to 5 per cent.

"The balance of risks in 2016 is skewed towards growth disappointment and fiscal slippage," said ANZ Bank economist Ng Weiwen in a Bloomberg interview. "Structurally, lower oil prices means that Malaysia will still be confronted with significant growth and fiscal headwinds."

But Indonesia could have a good year ahead. OCBC economist Selena Ling said: "Indonesia could see growth north of 5 per cent this year because of the policy decisions it has made, unleashing stimulus measures and removing or loosening caps on foreign ownership of companies."

A version of this article appeared in the print edition of The Straits Times on February 26, 2016, with the headline 'Singapore's bleak outlook mirrors regional slump'. Print Edition | Subscribe