Singapore ups trade forecasts again as Q2 non-oil exports surge by better-than-expected 10.1%

• Aug 11, 2021

SINGAPORE has upgraded its trade forecasts for the third time this year, on the back of strong second-quarter growth in sectors such as electronics and petrochemicals.

Non-oil domestic exports (NODX) could grow by 7 per cent to 8 per cent year on year in 2021, trade agency Enterprise Singapore (ESG) said in a review on Wednesday – a bump up from the projection of 1 per cent to 3 per cent issued in May.

And, with oil prices likely to stay high, total merchandise trade is now tipped to expand by 13 per cent to 14 per cent year on year, up from 5 per cent to 7 per cent in May.

Besides a better-than-expected showing in the year to date, ESG also pointed to “higher oil prices and robust global semiconductor demand” as drivers of total trade in 2021.

The rosier outlook came as NODX was higher by 10.1 per cent in the April-to-June period, picking up from the 9.7 per cent rise in the first three months.

Exports were lifted by an 8.5 per cent increase in shipments of non-electronics, such as specialised machinery for semiconductors, petrochemicals and primary chemicals.

Still, the electronics cluster, which made up nearly one-quarter of NODX, posted a fifth straight quarter of growth. Electronics shipments were up by 15.7 per cent, on the back of personal computers, integrated circuits (ICs), and diodes and transistors.

With the overall economy notching above-forecast gross domestic product (GDP) growth of 14.7 per cent in the second quarter, UOB economist Barnabas Gan said in a report that “Singapore’s economy has been supported by the favourable export environment since the start of this year”.

Both total merchandise trade and NODX have grown by more than expected in May, ESG noted, while citing the boost from electronics and related specialised machinery exports “amid robust global semiconductor demand”.

Petrochemicals are recovering from a global down-cycle in 2019 and 2020, while improved oil prices are “likely to support our oil trade in nominal terms, and in turn total trade in 2021” on strong demand and tight global supply, the agency added.

Mainland China, Hong Kong and Taiwan were the key markets behind Singapore’s NODX growth in the quarter, and helped to offset declines in shipments to other major destinations such as the United States, Japan and the European Union.

The uneven performance of Singapore’s main export markets in the quarter was “largely reflecting the divergences in the Delta upticks and vaccination progress then”, said Selena Ling, head of treasury research and strategy at OCBC.

But Brian Tan, economist at Barclays, noted in a report that the latest GDP data “indicates a sequential contraction in Q2 domestic demand offsetting a smaller contribution from net exports”.

On a seasonally adjusted, monthly basis, NODX was lower by 4.0 per cent – reversing the 17.7 per cent increase in the first quarter – on a decline in non-electronics.

Non-oil re-exports (NORX) – a proxy for the wholesale trade sector – grew by 26.6 per cent year on year in the second quarter, up from 13.7 per cent in the three months prior, with help from higher shipments of electronics such as ICs and telecom gear.

Overall, merchandise trade jumped by 27.3 per cent year on year – picking up from 4.9 per cent in the quarter before – as the oil trade returned to growth on higher prices.

The latest figures take NODX growth to 9.9 per cent in the first six months of 2021 – which Mr Gan noted was its largest first-half expansion in more than a decade – while merchandise trade was up by 15.3 per cent.

Ms Ling said: “Assuming that NODX chugs along at 6.1 per cent year on year in H2 2021, which is already a moderation… then a full-year NODX growth of 8 per cent year on year is plausible.”

Singapore’s total services trade increased by 9.3 per cent year on year to S$124.6 billion, reversing the decline of 9.8 per cent in the quarter before. That’s as exports returned to positive territory on growth in business, transport and financial services.

Said ESG in its quarterly review, citing the International Monetary Fund outlook: “Merchandise trade is expected to lead growth by broadening from pandemic-related purchases, while services trade recovers more slowly due to subdued cross-border travel.”

Still, Mr Gan added: “We remain concerned on how Covid-19-related risks may evolve in the months ahead for Singapore, as well as across Singapore’s key trading partners, as anecdotal evidence has shown how quickly issues may turn south.”

Separately, the Ministry of Trade and Industry on Wednesday upgraded the full-year GDP forecast to between 6.0 per cent and 7.0 per cent.

Source: https://www.businesstimes.com.sg/government-economy/singapore-ups-trade-forecasts-again-as-q2-non-oil-exports-surge-by-better-than