SINGAPORE – Singapore’s key exports dropped year on year for the 11th straight month, with shipments shrinking in nine of the Republic’s 10 biggest markets.

External demand is expected to remain weak in the third quarter amid the persistent global electronics downturn, although there are some signs that trade may recover towards the end of the year, said observers.

Non-oil domestic exports (Nodx) shrank 20.1 per cent in August year on year, worse than the 15.8 per cent decline forecast by economists in a Reuters poll. This comes after a revised 20.3 per cent contraction in July.

Compared with the previous month and seasonally adjusted, August exports fell 3.8 per cent, sharper than the 3.5 per cent drop in July, data from trade agency Enterprise Singapore (EnterpriseSG) showed on Monday.

OCBC Bank chief economist Selena Ling noted that Nodx shrank 16.2 per cent year on year in the first eight months of 2023.

“Even with a gradual improvement for the remaining months, full-year Nodx is likely to contract at least 11 per cent year on year. If this materialises, this would potentially mark the worst annual Nodx performance since 2001, when it shrank by 14.5 per cent,” she said.

But Singapore’s economy is unlikely to slip into a technical recession due to the rebound in its tourism-related sectors, she added.

The Government has forecast that Nodx will contract by 9 per cent to 10 per cent in 2023.

Ms Ling also pointed to a recent Reuters report that Taiwan Semiconductor Manufacturing Company had told its major suppliers to delay deliveries of high-end manufacturing equipment due to concerns about customer demand. 

“Any further delay in the electronics global cycle turnaround is likely to have spillover impact on the downside growth risks for the first half of 2024, which, coupled with the currently weak growth footing of the Chinese economy, could warrant a stronger fiscal stance at Budget 2024,” she said.

DBS economist Chua Han Teng said the latest data reflects the ongoing external headwinds Singapore’s trade-reliant economy faces.

“The global economic environment remains uncertain, amid high interest rates in advanced economies and a bumpy post-pandemic recovery in China,” he said, adding that the trade decline will likely continue in the third quarter before narrowing towards the end of the year.

But there are a few rays of hope.

“For Nodx, at least the electronics decline, on a three-month moving average basis, has bottomed out and is starting to gradually recover. The non-electronics drop was partly due to last year’s high base – for example, in pharmaceuticals, which also tend to be volatile,” said Mr Chua.

RHB senior economist Barnabas Gan downgraded his full-year Nodx growth forecast, expecting exports to shrink 12.5 per cent, compared with 8 per cent previously. But it helps that interest rates are soon likely to peak and global semiconductor billings have appeared to trough, he said.

Maybank economists Chua Hak Bin and Brian Lee said that external demand remains tepid, but the decline in Nodx should narrow significantly or even revert to modest growth in the fourth quarter as base effects turn favourable.

“Stabilising global electronics demand, a resilient US economy and gradual run-down of elevated industrial inventories in China should help support Singapore’s and Asian exports,” they added.

In August, electronics shipments continued to weigh on exports compared with a year ago. They tumbled 21.1 per cent year on year, after a 26.1 per cent drop in July.

Integrated circuits, disk media products and personal computers contributed the most to the decline in such exports.

Meanwhile, non-electronic shipments contracted by 19.9 per cent, extending an 18.5 per cent decline in the previous month. Structures of ships and boats, pharmaceuticals and specialised machinery contributed the most to the fall in these shipments.

Exports of ship and boat structures and pharmaceuticals contracted from a high base a year ago, and specialised machinery also continued to decline amid weak demand for semiconductor-related equipment, said EnterpriseSG.

Shipments to all of Singapore’s top 10 markets shrank in August, except for Indonesia.

Nodx to the United States saw the steepest drop among the various markets. Shipments contracted 32.4 per cent in August, reversing a 34.3 per cent expansion in July, due to lower shipments of ship and boat structures, food preparations and disk media products.

Shipments to the European Union plunged 28.9 per cent – moderating from a 38.6 per cent drop in the previous month – due to a fall in pharmaceuticals, specialised machinery and miscellaneous manufactured articles.

Exports to China fell 16.4 per cent, likewise dragged by pharmaceuticals and specialised machinery, as well as semiconductors.

Total trade contracted 15.2 per cent year on year, extending the 20.9 per cent drop in July.

Amid lower oil prices compared with a year ago, oil domestic exports shrank 24.7 per cent in August, following July’s 37.4 per cent contraction.