SINGAPORE - Singapore’s trade is expected to shrink or, at best, see no growth in 2023 as oil prices start to slide, Enterprise Singapore (EnterpriseSG) said on Wednesday.
The forecast for 2023 is “cautiously optimistic”, said EnterpriseSG, adding that a minus 2 per cent to 0 per cent growth is expected for both total merchandise trade and non-oil domestic exports (Nodx).
Oil and electronics trade, which had respectively accounted for about 40 per cent and 25 per cent of total merchandise trade growth in the first three quarters of 2022, are expected to weaken given the poorer economic outlook.
It added: “With lower projected oil prices in 2023, support for oil trade and total trade in nominal terms could be limited going into 2023. Similarly, easing electronics trade and exports performance could weigh on total trade and Nodx growth for the rest of 2022 and 2023.”
This will be a dip from the strong trade performance that Singapore has seen in 2022. On Wednesday, Singapore raised its full-year 2022 trade forecasts once again, on the back of better-than-expected performance driven by oil and electronics trade.
Nodx is forecast to grow by around 6 per cent in 2022. The previous projection was 5 per cent to 6 per cent for the year.
Total merchandise trade is expected to grow by 19.5 per cent to 20 per cent in 2022, up from the previous projection of 15 per cent to 16 per cent.
For the third quarter of 2022, non-oil domestic exports grew by 7.2 per cent year on year, following the 8.9 per cent growth in the previous quarter.
The growth was led mainly by non-electronic products, which expanded by 10 per cent year on year in the third quarter, extending its 8.6 per cent growth in the previous quarter. This is backed by pharmaceutical exports, which grew by 28.7 per cent, as well as structures of ships and boats and food preparation, which rose by about 30 per cent.
However, exports of electronic products fell by 1.8 per cent year on year, reversing from the 9.7 per cent growth in the previous quarter and snapping nine consecutive quarters of growth.
This comes amid a decline in exports for disk media products, parts of PCs and capacitors, which fell by about 24 per cent, 20 per cent, and 42 per cent, respectively.
Nodx to Singapore’s top 10 markets also grew as a whole in the third quarter of 2022, although exports to China and Hong Kong fell.
The country’s top export markets were the United States, the European Union and Indonesia.
Oil domestic exports grew by 75.2 per cent year on year in the third quarter, extending the 72.9 per cent growth in the previous quarter. In actual volume, exports rose by 18.6 per cent. Total merchandise trade grew 25.7 per cent year on year in the third quarter, easing from the 28.1 per cent growth in the previous quarter.
Total services trade also rose by 14.2 per cent to reach $173 billion for the quarter.
EnterpriseSG said that while the higher oil prices will likely boost exports for the rest of the year, the global economic outlook is expected to dim. Factors such as high inflation and tighter financial conditions, as well as spillover effects from the Covid-19 pandemic and the Russia-Ukraine conflict, may constrain production and weigh on the economy.
The International Monetary Fund said global economic growth is expected to slow to 2.7 per cent in 2023. Similarly, the World Trade Organisation has projected global merchandise trade to grow 1 per cent in 2023, down from its earlier forecast of 3.4 per cent.
Most economies are also expected to grow at a slower pace in 2023, except China.
In its quarterly economic report released on Wednesday, the Ministry of Trade and Industry said oil prices are expected to dip in tandem with the slowdown in the global economy.
Oil prices are estimated to be around US$95 per barrel in 2023, down from US$102 per barrel in 2022, according to the Energy Information Administration.
The outlook for the electronics sector has also weakened, with semiconductor and computer peripheral firms noting a rapid softening in consumer demand.
