South-east Asia has overtaken the United States to become the largest market for Singapore's goods and services, according to Ministry of Trade and Industry (MTI) data yesterday.
It noted that the combined demand from the top five economies in Asean outside Singapore - Indonesia, Malaysia, Thailand, the Philippines and Vietnam - accounted for 10.4 per cent of Singapore's overall gross domestic product (GDP) last year, up from 9 per cent in 2010.
The US accounted for a 10.1 per cent share of GDP, while China accounted for 8.8 per cent.
"The emergence of Asean-5 as Singapore's largest final demand market was due to robust consumption and investment growth in the region, particularly in Indonesia and Malaysia, as well as the ability of Singapore's exporters to tap on demand opportunities in the region," MTI said.
CIMB Private Banking economist Song Seng Wun noted: "The shift is partly a reflection of the slowdown in the US and China, while we continue to see South-east Asian economies holding their growth rates above the global level, with Indonesia and the Philippines growing strong, while Thailand is stabilising.
"It is also a reflection of the region's rising middle class and growing capacity as an integrated market for goods and services. More can be done intra-regionally now as regional governments put in the efforts to stimulate domestic demand."
One Singapore company eyeing this trend is seafood producer Fassler Gourmet, which was acquired by Credence Fund II in late 2014. The company has set regional expansion as one of its growth priorities.
"Asean is a very natural choice because of the proximity, and also a lot of our distributors are already present across the region," chief executive Mellissa Chen told The Straits Times. "We are now working on entering Malaysia, Indonesia and Thailand. It is still early days, but once we remove the barrier, we expect a lot of demand for our upmarket products."
China's share of Singapore's GDP grew from 6.9 per cent in 2010 to 8.8 per cent last year, the fastest among the top markets. The US share also grew, from 9.7 per cent in 2010 to 10.1 per cent last year.
The two economies are expected to slow down this year, one of the external risks that led MTI to narrow Singapore's 2016 growth forecast from 1 per cent to 3 per cent, to 1 per cent to 2 per cent.
Against this backdrop, Singapore's trade performance remained choppy, with non-oil domestic exports (NODX) dipping 4.5 per cent year on year in the first half of the year. Around two-thirds of Singapore's GDP relies on external demand.
The trade outlook will be clouded this year, but the drag from low oil prices may ease in the coming months.
International Enterprise Singapore now expects full-year NODX to shrink by 3 per cent to 4 per cent, in the upper end of the 3 per cent to 5 per cent range previously forecast.
