Singapore key exports tumble 14.7% in May, raising recession risk
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The drop was much worse than the 7.7 per cent fall expected by economists in a Bloomberg poll.
ST PHOTO: LIM YAOHUI
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SINGAPORE – Singapore’s key exports fell for the eighth straight month in May and at a steeper rate, raising the risk of a technical recession.
Non-oil domestic exports (Nodx) shrank 14.7 per cent year on year in May, after a 9.8 per cent contraction in April,
The result was much worse than the 7.7 per cent fall expected by economists in a Bloomberg poll.
In real terms after adjusting for inflation, Nodx decreased by 7.6 per cent, following the 3.1 per cent fall in April, EnterpriseSG said.
Maybank economist Chua Hak Bin said “the export slump is worsening and Singapore is now at greater risk of a technical recession”.
A technical recession is when an economy contracts for two consecutive quarters. Singapore’s economy shrank 0.4 per cent on a quarter-on-quarter basis in the first quarter of 2023.
DBS Bank economist Chua Han Teng pointed to the difficult global external environment faced by exports and the manufacturing sector, particularly for electronics.
He said the latest numbers show that Singapore’s electronics exports slump has yet to reach bottom.
Electronics shipments were the biggest drag on May’s Nodx, tumbling 27.2 per cent year on year in May, a sharper contraction than the 23.3 per cent plunge in April.
Integrated circuits, disk media products and parts of integrated circuits contributed the most to the decline, with the last segment seeing the sharpest fall of 48.7 per cent.
“The near-term outlook for electronics exports remains uncertain, given that inventory destocking, for example in the global semiconductor market, is still ongoing,” Mr Chua said.
However, he said artificial intelligence (AI) will drive demand for chips used to power AI systems, and this will present opportunities for the electronics sector in the medium term.
Non-electronics Nodx shrank by 10.7 per cent, following the 5.8 per cent fall in April. The decline was led by specialised machinery, petrochemicals and pharmaceuticals.
Shipments of pharmaceutical products fell 14 per cent in May compared with the same month in 2022.
On a seasonally adjusted month-on-month basis, Nodx contracted by 14.6 per cent in May to $13.8 billion, reversing from 2.6 per cent growth in April.
Shipments to most of Singapore’s top 10 markets declined, led by Hong Kong, Malaysia and Taiwan.
However, Nodx to China and the United States rose – with shipments to China reversing declines to rise 3.7 per cent, and those to the US growing 4.8 per cent.
China is the second-biggest export market for Singapore, with a 15.2 per cent share of Nodx in the January-to-May period.
Singapore’s shipments to China have been contracting, and May’s 3.7 per cent rise was the first increase since June 2022, when it rose 2.1 per cent.
DBS’ Mr Chua said the “Nodx upswing to China stood out despite recent Chinese data showing that its post-pandemic economic recovery, for instance in the industrial sector, is losing steam”. But he said it was too early to conclude if Singapore’s exports to China have indeed turned a corner.
“We will have to watch for a couple more data points before we can ascertain that China has turned from a drag to a boost to Singapore’s overall Nodx performance,” Mr Chua said.
Senior economist Alex Holmes of Oxford Economics said the rebound in shipments to China “was mainly due to a flattering base for comparison”.
He added that the Singapore dollar value of exports to China was higher in May than in April. But the May figure was still lower than the total Singapore dollar value of exports in March and February, he said.
“There is little to alter our view that the China-reopening trade boost will be relatively small and short-lived, chiming with recent disappointing Chinese May trade and activity data,” said Mr Holmes.
Maybank’s Dr Chua and his colleague Lee Ju Ye said in a report that the increase in Nodx to China was mainly due to the surge in “miscellaneous transactions”.
These transactions include shipments of non-monetary gold, which helped to offset the continued decline in chemicals (minus 39.7 per cent) as well as machinery and equipment (minus 28.8 per cent), the Maybank economists noted.
Non-monetary gold refers to gold that is not held as reserve assets by the world’s central banks.
Excluding the miscellaneous transactions category, the Maybank economists said “Nodx to China plunged by a steeper 32.3 per cent compared with the 27.2 per cent fall in April”.
They added that the export recovery to China could therefore be “fake” and a blip.
Still, Maybank expects exports and manufacturing to stabilise and improve in the latter part of the second half of 2023.
A review of Singapore’s quarterly trade performance in May showed that Nodx fell 16.2 per cent in the first quarter from the same period a year ago, extending the 14 per cent decline in the previous quarter.
EnterpriseSG also slashed its export forecasts, saying it expects Nodx to shrink by 8 per cent to 10 per cent in 2023.
The previous forecast was between zero growth and a contraction of 2 per cent.
