SINGAPORE - Singapore’s key exports continued to grow at a slower pace for the fifth straight month in April as Covid-19 lockdowns in China began to bite.

Inflation and the prospect of more rate hikes that could derail growth in the United States, as well as the effects of the Russian-Ukraine conflict, continued to weigh on Singapore’s external demand. 

Non-oil domestic exports (Nodx) rose 6.4 per cent year on year in April, following the 7.7 per cent growth in March, according to data released by Enterprise Singapore (ESG) on Tuesday (May 17).

The numbers missed the 6.5 per cent median forecast of analysts polled by Bloomberg.

The situation in China remains one of the main concerns among economists that The Straits Times spoke to.

Ms Selena Ling, chief economist and head of treasury research and strategy at OCBC Bank, said the lockdowns in key cities like Shanghai have hurt onshore business confidence and impacted private consumption.

She said the impact is being felt more acutely from April onwards, as seen in the soft economic indicators like industrial production, retail sales and the unemployment rate. 

Mr Irvin Seah, senior economist at DBS Bank, said China is a critical factor to watch in the near term.

He added that the lockdowns in China have disrupted supply chains and demand in the region, and Singapore’s exports have not been spared.

China is the world’s second-largest economy, and is regarded as an important source of final demand in Asia and globally.

Nonetheless, this was the 17th straight month of growth for Singapore’s Nodx.

Electronic Nodx rose by 12.8 per cent year on year in April, following the 11.5 per cent growth in March.

Shipments of integrated circuits and telecommunications equipment contributed the most to the growth in electronic Nodx.

Ms Ling said that electronic shipments have grown by double digits in year-on-year terms for the 14th straight month.

Electronics remained resilient, with the exception of diodes and transistors, which fell for the third month out of the last four months, possibly due to the global chip shortage, she added.

Maybank economists Chua Hak Bin and Lee Ju Ye noted in a report that the slowdown this time round was mainly due to non-electronics shipments, which grew 4.6 per cent in April, down from 6.8 per cent in March.

Growth eased due to the decline in non-monetary gold - captured in the 10.4 per cent fall in miscellaneous transactions - and the 6 per cent drop in pharmaceuticals. 

On a month-on-month seasonally adjusted basis, Nodx shrank for the third consecutive month, dropping 3.3 per cent to $16.6 billion in April. This followed the 2.3 per cent decline in March.

Of Singapore’s top export markets, shipments to China, Hong Kong and South Korea declined year on year.

OCBC’s Ms Ling said the soft spot is very clearly in North Asia, and it is all linked to the situation in China.

Indeed, shipments to China shrank 10.6 per cent year on year in April - the first time since August 2021 that they have contracted, Maybank noted.

On a brighter note, Maybank said exports to Singapore’s Asean neighbours stayed robust, with shipments to Indonesia and Thailand rising 20.8 per cent.

Export growth to Malaysia slowed to 20.7 per cent in April from 29.1 per cent in March.

Ms Ling said the reopening of borders and relaxation of Covid-19 measures have generally benefited demand in these countries.

Shipments to Taiwan posted the strongest growth of 29.9 per cent, driven by specialised machinery, integrated circuits parts and measuring instruments.

In the mid- to long term, DBS’ Mr Seah said the elephant in the room is inflation, with the continuing war in Ukraine driving up prices.

To fight inflation, central banks around the world, including Singapore’s, have started tightening monetary policy. But raising interest rates too aggressively will hurt consumer and business sentiment.

Inflation has also driven up Singapore’s Nodx numbers, which are stated in nominal terms. Stripping out the effect of higher prices, Maybank said real Nodx based on 2018 prices contracted for the third straight month by 3.9 per cent.

Maybank said exports continue to be driven and flattered by higher prices rather than volumes.

Being a trade-dependent economy, Singapore faces extensive external headwinds, and the downside risks have intensified.

Ms Ling said market players are now concerned about the risk of an outright recession in the US.

She added that the European Union has also warned that growth could stall at 0.2 per cent this year, if natural gas supplies from Russia are seriously disrupted.

Mr Seah does not think Singapore will not head into a full-fledged recession, but he is not discounting the possibility that the economy will slip into a technical recession, which is defined as two consecutive quarters of negative growth.