Experts predict contraction in 2023, with recovery expected in 2024 amidst challenging global conditions.
SINGAPORE: Singapore’s non-oil domestic exports (NODX) are heading towards their worst performance in over two decades. Selena Ling, Chief Economist and Head of Global Markets Research and Strategy at OCBC, forecasts a year-end contraction of -12.5%, marking the steepest decline since 2001. This outlook aligns with the lower end of Enterprise Singapore’s projected range of -12.5% to -12.0%. Ling’s prediction is based on a modest recovery in December, where NODX is expected to grow by 5.9% year-on-year.
While November provided a slight glimmer of hope with a 1% growth in NODX, breaking a 13-month streak of contractions, experts like UOB’s Senior Economist Alvin Liew and Associate Economist Jester Koh believe the full-year NODX will contract slightly more, estimating a -12.6% decline, down from their earlier forecast of -12.5% and below the range set by Enterprise Singapore.
The sustainability of the recent recovery in the external sector remains a key concern. Oxford Economics’ Lead Asia Economist Alex Holmes notes, “The question now is whether this improvement marks a temporary pause or an extended trend. We suspect it will be the latter.” He further warns that a resurgence in growth is unlikely given the sluggish growth in advanced economies and the negative impact of past policy tightening.
In November, electronic NODX dropped by 12.7% year-on-year, with significant declines in integrated circuits, personal computers, and diodes & transistors. On the other hand, non-electronic NODX showed positive movement, growing by 5.2% year-on-year, bolstered by pharmaceuticals, non-monetary gold, and miscellaneous manufactured items.
The downturn in NODX was widespread across various markets, with notable declines in Taiwan (-40.0%), the EU 27 (-21.7%), and Indonesia (-23.6%). However, exports to the US, China, Thailand, and Hong Kong saw positive growth.
Despite these challenges, analysts from UOB suggest that the recent figures may indicate a potential bottoming out in the electronics trade cycle, with expectations of a recovery in the coming quarters. The six-month moving average of electronic NODX is showing signs of narrowing contraction year-on-year.
Looking ahead to 2024, Selena Ling maintains an optimistic outlook, forecasting a 4% to 6% growth in NODX, driven by a recovery in global electronics demand. She attributes this forecast to an easing global monetary policy cycle and hopes that geopolitical tensions will not worsen.
Meanwhile, UOB’s Liew and Koh are even more optimistic, predicting a 6.0% expansion in 2024, driven largely by base effects from the sharp year-on-year decline seen from November 2022 to September 2023. However, they caution that headwinds persist due to weak external conditions and tight financial conditions arising from high interest rates.
Despite the optimism, Oxford Economics’ Holmes remains cautious, pointing to the slowing global growth environment and the lasting impact of past policy tightening, which may limit Singapore’s exports from providing a significant boost to GDP in 2024.
