Better-than-expected Q2 trade prompts 5-6% growth projection for 2017

Better-than-expected Q2 trade prompts 5-6% growth projection for 2017
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Published: 9:45 AM, August 11, 2017
Updated: 7:15 PM, August 11, 2017

SINGAPORE — Growth in non-oil domestic exports (Nodx) slowed in the second quarter of the year, increasing by 2.7 per cent to a seasonally adjusted S$43 billion, following the 15.3 per cent expansion in the first quarter, according to the latest trade data.

International Enterprise (IE) Singapore on Friday (Aug 11) narrowed its Nodx growth projection for the year to the upper end at 5.0 to 6.0 per cent, from its earlier projection of 4.0 to 6.0 per cent.

The improved forecast was attributed to a positive outlook and better than expected trade performance in the first six months of the year.

Analysts expect that Nodx growth for the year could be even higher than what IE Singapore has projected however, due to improved global growth performance and regional trade activities.

UOB economist Mr Francis Tan said the official forecast was “conservative”, but added that: ”If we take the projected midpoint growth at 5.5 per cent, it could imply that there are expectations the second half of 2017 could be slower at only 2 per cent growth, on average.”

“There are potential risks in terms of external trade, due to an expected slowdown in growth in China,” he added.

Ms Selena Ling, head of Treasury Research and Strategy, OCBC Bank, said: “We think that full-year Nodx growth could potentially exceed the top end of the narrowed IE Singapore Nodx forecast. The first half 2017 Nodx growth is already 8.6 per cent.”

Improved global growth prospects, a healthy China economy and robust regional trade activities are expected to drive growth. Moreover, the anti-globalisation rhetoric from the United States administration under

President Donald Trump has been “dampened” in the past few months, she said.

Explaining the global context, IE Singapore noted that: “The global economic and trade outlook remains positive since the last update, notwithstanding uncertainties surrounding near-term economic and policy developments.”

“The International Monetary Fund upgraded its 2017 growth projections for our key trading partners which include the Euro area, China and ASEAN-5, even as forecasts for the United States and United Kingdom were lowered,” said the trade agency in a statement.

“On the trade front, the World Trade Organisation expects trade to grow by 1.8 per cent to 3.6 per cent in 2017 from the weak 2016.”

In the latest performance statistics, non-oil exports (Nox), which includes both Nodx and non-oil re-exports (Norx), grew year on year by 5.7 per cent in the second quarter, continuing its expansion from the previous quarter.

The increase in Nodx was driven mainly by electronic exports which grew for the third straight quarter, outweighing the decrease in non-electronics.

On a year-on-year basis, domestic exports of electronic products increased by 13.3 per cent in the second quarter, following the 9.5 growth in the first quarter. Integrated circuits, personal computer parts, and personal computers expanded by 25.1 percent, 18.4 percent and 11.4 percent respectively, contributing the most to the increase in electronic Nodx.

Domestic exports of non-electronic products declined by 1.1 per cent over the year, off from the 17.8 per cent expansion in the first quarter. The largest contributors to the decrease were civil engineering equipment parts, pharmaceuticals, and non-electric engines and motors.

Nodx to all top markets rose in the second quarter compared to the same period last year, except for the European Union, Hong Kong and the US. The biggest contributors to the Nodx increase were China, South Korea and Taiwan.