Why It Matters

Export woes spell tough year

These are challenging times for exporters as last month's disappointing trade figures show all too well.

Singapore's non-oil domestic exports - which essentially mean anything shipped overseas bar crude oil and refined products - fell 7.2 per cent from the same month in 2014. And that followed a 3.4 per cent decrease in November.

The numbers are no better if oil-related exports are factored in. Total trade fell 6.8 per cent in November over the same month in 2014, and by 8.4 per cent last month.

The dismal figures point to a tough year ahead.

China's slowing growth, dimmer prospects in the region, the unrelenting slump in oil prices and now signs of weakness in the US recovery have led some economists to warn that Singapore will be stuck in a trade slump through the first quarter.

A somewhat resilient Singdollar is also a concern. Although the currency has depreciated against the US dollar, it has held up against the ringgit, rupiah and yuan, currencies of its key Asian export markets.

So it is no surprise that the top contributors to the decline in last month's non-oil domestic exports were China, Indonesia, South Korea and Taiwan.

Slumping oil prices cut more deeply into non-electronics exports, particularly that of petrochemicals. While plunging oil prices can be easily blamed, weak global demand is the main story behind the numbers. And lower commodity prices are a symptom of that. So, falling crude prices are not going to be a quick fix for Asia's growth malaise.

The manufacturing sector is also battling other headwinds, including a slowing property market, rising interest rates and an erosion in cost competitiveness as a result of restructuring, pricier labour and a relatively firm dollar.

While the growth slowdown in major trading partners such as China is worrying, the numbers do not yet point to Singapore slipping into a recession. For that to happen, economists say neighbouring countries would need to have sustained a sharp contraction in growth. And that isn't likely, for now.

Clearly, last month's data is yet another reminder of the harsh environment out there. But low growth this year is still on the cards.

A version of this article appeared in the print edition of The Straits Times on January 19, 2016, with the headline 'Export woes spell tough year'. Print Edition | Subscribe