Singapore’s export recovery feeling effects of global slowdown

SINGAPORE - Singapore’s key exports expanded year on year for a third straight month in September but at a slower pace and well below forecast, figures released by Enterprise Singapore on Oct 17 show.

Analysts said Singapore’s export outlook remains uncertain, with geopolitical tensions, the upcoming elections in the US, and volatility in the electronics industry.

Non-oil domestic exports (Nodx) rose 2.7 per cent from a year ago, after increasing by 10.7 per cent in August and 15.7 per cent in July.

But September’s expansion came in far below the expectations of analysts polled by Bloomberg, who tipped growth to hit 9.1 per cent.

While shipments of both electronics and non-electronics grew, electronics exports saw a sharp deceleration – from expanding 35.1 per cent year on year in August, to just 4 per cent in September.

Exports of disk media products grew by 64.6 per cent, while personal computers expanded by 55 per cent. But integrated circuits – also known as chips or semiconductors – which made up nearly 11 per cent of total Nodx, rose just 4.8 per cent.

OCBC chief economist Selena Ling said: “It’s a challenging period for the global chip industry, (with) ASML’s cut in earnings guidance and the big sell-off in chip stocks.”

On Oct 15, Dutch chip equipment maker ASML cut its annual sales forecast over weak non-artificial intelligence (AI) chip demand, sending semiconductor stocks in the US and Asia tumbling.

But other economists said Singapore’s electronics purchasing managers’ index, a barometer of the manufacturing sector, suggests that manufacturing and electronics recovery remains intact.

DBS economist Chua Han Teng said: “Despite volatility in Singapore’s electronics shipments figures in recent months, the recovery trend based on the three-month moving average year-on-year growth remains intact.

“Demand for smartphones, personal computers and chips related to AI has been supported, while the recovery in autos and industrial chips has been more gradual and would be extended.”

He expects Singapore’s electronics firms to capitalise on the global technology upcycle, driven by the replacement of smartphones and personal computers, as well as the broadening adoption of AI applications, he said.

Still, geopolitical uncertainties do not bode well for the electronics trade.

Ms Ling said: “Geopolitical tensions, especially with the upcoming US elections, may mean greater uncertainties ahead for high-stakes strategic industries like semiconductors.

“Betting markets show Trump significantly ahead of Harris, even though traditional polls still favour Harris. If Trump wins, this may mean a potential tariff shock for China and the world.”

On the non-electronics side, shipments grew 2.3 per cent year on year in September, slowing from the 3.6 per cent rise in August.

Pharmaceuticals expanded 35 per cent, while specialised machinery grew 12.9 per cent. Other speciality chemicals rose 46.2 per cent.

On a month-on-month seasonally adjusted basis, Nodx increased by 1.1 per cent in September, reversing the decline of 4.7 per cent in the previous month. Non-electronics grew while electronics decreased.

On the same basis, the level of Nodx reached $14.9 billion in September, which was slightly higher than August’s $14.7 billion. It was also higher than the level reached in September 2023, which was $14.2 billion.

Exports to the top markets as a whole grew in September 2024, although shipments to the US, Hong Kong, Japan and China fell, EnterpriseSG noted.

Ms Ling said the slump in exports to key markets is broad-based across electronics and non-electronics exports, implying that domestic demand in the major economies is likely slowing.

Maybank senior economist Chua Hak Bin noted the sharp decline in exports to the US, and said the outcome of the elections will have major effects on trade, especially since a Trump win could mean a sharp increase in US import tariffs on China and the rest of the world.

“We think the impact on trade flows from such sweeping tariffs will be far more negative and an order of magnitude higher than the tariff hikes under Trump 1.0, which were largely targeted at China,” he said.

The largest contributors to the growth in September Nodx were the European Union 27, Indonesia and South Korea. 

Exports to the EU 27 grew on the back of pharmaceuticals, other speciality chemicals and petrochemicals.

Meanwhile, shipments to Indonesia expanded due to telecommunications equipment, measuring instruments and petrochemicals.

Exports to South Korea also grew, due to specialised machinery, integrated circuits and personal computers.

Given the weakness in September’s figures, Ms Ling said full-year growth is likely to fall short of the official forecast of 4 per cent. The fourth quarter is also likely to disappoint, she added.

But DBS’ Mr Chua said: “Barring significant negative shocks from uncertainties such as lingering geopolitical and trade tensions that could disrupt global production, we expect the global economic expansion to likely hold up.

“Global growth will be supported by anticipated continued interest rate cuts, particularly by the US Fed, following its sizeable reduction in September 2024 and by the European Central Bank, as well as by the Chinese authorities’ combined monetary and fiscal policies aimed at shoring up China’s economy.”