Slump in pharmaceutical sector hits Singapore exports

Pharmaceutical shipments have been volatile and plunged 39.9 per cent over April last year.
Pharmaceutical shipments have been volatile and plunged 39.9 per cent over April last year. PHOTO: ST FILE

Non-oil domestic output down 0.7% in April, but experts optimistic it is a temporary blip

Exports have been on a winning streak, but an unexpected slump in the volatile pharmaceutical segment stalled the recovery last month and hinted that the outlook is still not completely cloud-free.

Non-oil domestic exports contracted 0.7 per cent last month over the same month a year earlier.

This came after five straight months of growth and was in stark contrast to economists' expectations of a 13 per cent expansion.

But some economists remain optimistic that last month's numbers are a temporary blip in an ongoing recovery.

Trade-related sectors, especially electronics manufacturing, have enjoyed a significant turnaround since late last year on the back of stronger global demand, they noted.

Still, it remains to be seen whether this can be sustained.

Much of last month's decline was attributed to volatile pharmaceutical shipments, which plunged 39.9 per cent over April last year. Exports of non-electric engines and motors, as well as non-monetary gold, also sank.

These declines offset a 4.8 per cent expansion in electronics non-oil domestic exports - their sixth straight month of growth - to yield last month's negative reading.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said: "The weak April export numbers are a temporary blip from the trade recovery that Singapore has been witnessing for the past five months."

They added: "Electronics exports are still expanding at a healthy pace and are more representative of global demand. We think Singapore's exports and manufacturing will continue to be well supported for the rest of this year, albeit at a more moderate pace."

Non-oil domestic exports had been expanding at an average rate of 14 per cent per month in the five months preceding April, as a more sanguine global outlook lifted Singapore's economy out of a protracted trade slump.

United Overseas Bank economist Francis Tan agreed that last month's dip was likely a one-off occurrence, noting that monthly trade data can be "notoriously volatile".

He expects non-oil domestic exports to record positive growth this year after four years of contraction.

Still, he said: "We are also expecting that the strong double-digit (export) growth since November 2016 cannot be sustained into the second half of 2017. This is especially since recent trade numbers reported by Asian economies also point to a slower growth rate.

"We are still carefully watching the negative impact from the anti-globalisation rhetoric that has been fuelling developed markets' sentiments."

DBS Bank senior economist Irvin Seah sees signs that the robust growth in the heavily trade-dependent manufacturing sector is peaking. "The strong performance thus far has been largely driven by consumer demand. To sustain the current pace of expansion, much will really depend on companies increasing their (capital investments) going forward," he said.

Mr Johnny Mok, the assistant general manager of electronic component assembly firm Add-Plus, said the company has seen sales pick up 10 per cent to 15 per cent in the first half of this year, compared with the same period a year earlier.

He said: "Things have been booming on the semiconductor side... and that should eventually benefit us. It remains to be seen whether it can be sustainable."

While there is no shortage of business, "the question is whether we have the capacity to support it", said Mr Mok, adding that companies like his are still feeling the crunch from manpower shortages.

A version of this article appeared in the print edition of The Straits Times on May 18, 2017, with the headline 'Slump in pharmaceutical sector hits S'pore exports'. Print Edition | Subscribe