Trade forecast upgraded after export jump in 2017

Trade growth is expected to be firm in 2018, though there could be moderation from last year's rapid pace.
Trade growth is expected to be firm in 2018, though there could be moderation from last year's rapid pace. ST PHOTO: JAMIE KOH

The solid export performance last year, when non-oil domestic shipments grew at the fastest pace in seven years, has prompted an upward review of trade expectations for this year.

Non-oil domestic exports (Nodx) advanced 8.8 per cent last year, a stark reversal from the 2.8 per cent decline in 2016. This was the fastest growth since 2010 and beat International Enterprise (IE) Singapore's earlier prediction of 6.5 per cent to 7 per cent expansion.

Trade growth is expected to be firm this year, though there could be moderation from last year's rapid pace, the trade promotion agency said yesterday.

IE Singapore now predicts Nodx growth of 1 per cent to 3 per cent this year, up from its previous prediction of 0 per cent to 2 per cent.

"Favourable sector-specific export trends in the machinery and chemicals clusters are expected to continue into 2018, coupled with a slight pick-up in global growth projected by the IMF in its latest update," it said.

Bank of America Merrill Lynch economist Mohamed Faiz Nagutha said the expected moderation in the pace of Nodx growth is largely technical, coming after last year's large rebound, which was in turn due to a low base in 2016.

OCBC estimates Nodx growth of around 5 per cent, assuming that domestic fiscal and monetary policy does not tighten and concerns about external trade protectionism do not materialise.

DBS economist Irvin Seah, while optimistic about continued trade expansion, similarly highlighted concerns over protectionist rhetoric from the United States.

Last year's strong Nodx growth was due to both the electronics and non-electronics sectors. Domestic exports of electronics products - comprising 29 per cent of Nodx - grew 8 per cent, a turnaround from 2016's 4 per cent contraction. The largest contributors were integrated circuits, disk media products and personal computer parts.

Non-electronics Nodx grew 9.2 per cent, after shrinking 2.3 per cent in 2016. This was led by specialised machinery, petrochemicals and non-monetary gold.

Nodx to nine of the top 10 markets grew last year, with the exception being Hong Kong, which was down 1 per cent. The biggest contributors to last year's Nodx growth were China, up 31.1 per cent, and South Korea, ahead 43.5 per cent.

But Mr Faiz warned: "We need to stay alert to activity in China, where we are projecting a gradual growth slowdown."

China is Singapore's largest export market, accounting for over 18 per cent of Nodx last year.

IE Singapore also raised its growth projection for total trade to 3 per cent to 5 per cent, up from 1.5 per cent to 3.5 per cent previously.

This was after total merchandise trade rose 11.1 per cent last year, reversing declines in the preceding two years. Total trade fell 4.9 per cent in 2016 and 8.9 per cent in 2015.

Both oil and non-oil sectors contributed to trade growth last year. Oil trade grew 36 per cent amid higher crude prices, recovering from an 18.1 per cent fall in 2016. In particular, oil domestic exports expanded by 33.4 per cent last year, after having fallen 12.6 per cent the previous year.

"Oil prices are generally expected to be higher in 2018 than in 2017, supporting our oil trade," said IE Singapore.

A version of this article appeared in the print edition of The Straits Times on February 15, 2018, with the headline 'Trade forecast upgraded after export jump in 2017'. Print Edition | Subscribe