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Singapore cuts exports forecast amid dim outlook

SINGAPORE — In a move that highlighted Singapore’s vulnerability to external conditions, trade agency IE Singapore on Wednesday (May 25) slashed its exports forecast for the Republic this year, citing a weakening global economic outlook.

SINGAPORE — In a move that highlighted Singapore’s vulnerability to external conditions, trade agency IE Singapore on Wednesday (May 25) slashed its exports forecast for the Republic this year, citing a weakening global economic outlook.

Non-oil domestic exports are now expected to contract between 3 and 5 per cent this year, IE Singapore said, compared with its earlier projection of between 0 per cent and a 2 per cent expansion. Economists note that weak global growth will continue to plague Singapore due to its openness as a city state, and impact externally-oriented sectors.

“Lacklustre growth conditions globally continue to affect the economic fate of the small but open city state, and this is observed in the sixth consecutive quarter of on-year contraction in the manufacturing sector in the first quarter,” said UOB economist Francis Tan. “As most of what Singapore’s manufactures are destined for the larger global stage, the gauge of industrial production is an important barometer that provides a glimpse into the future of intra-Asian trade.”

The manufacturing sector is an important pillar of growth for the Republic as it contributes to about one-fifth of the Singapore economy. The Economic Development Board will be releasing factory output data on Thursday.

A weaker trade outlook, as well as a softening of global economic conditions present downside risks to Singapore’s domestic economy, the Ministry of Trade and Industry said on Wednesday in a separate report that showed the Republic’s GDP grew a revised 0.2 per cent on a quarter-on-quarter seasonally-adjusted annualised basis in the first quarter, compared with 6.2 per cent in the final quarter of last year.

The MTI maintained its full-year growth forecast for Singapore at 1 to 3 per cent, as  sectors such as finance and insurance as well as wholesale trade could provide some support to overall GDP growth.

Tourism-related industries and biomedical manufacturing may also see an uptick. Still, the ministry cautioned of risks to externally-oriented sectors such as the manufacturing and transportation & storage sectors. 

In its report on Wednesday, IE Singapore also highlighted slowing growth in the United States and China, noting that the International Monetary Fund had downgraded its global growth forecast for 2016 to 3.2 per cent from 3.4 per cent in its latest World Economic Outlook (WEO) report. 

“At this juncture, we see little light at the end of the tunnel for regional demand and trade growth. NODX is likely to continue to drag its feet for the rest of 2016 as caution weighs on external consumption,” said Ms Selena Ling, head of treasury research and strategy at OCBC.

On a year-on-year basis, NODX fell 9 per cent for the first quarter, extending from previous quarter’s 3.5 per cent decline, IE Singapore said on Wednesday, due to lower shipments of both electronic and non-electronic goods.

Shipments to eight out of the Republic’s top 10 markets fell, with China, Taiwan and the European Union the biggest contributors to the decline. Shipments to China, Singapore’s largest export destination fell by 14.6 per cent in the first quarter, extending the previous quarter’s 12.3 per cent decline.

Shipments of electronic products shrank 3.4 per cent, extending from the 1 per cent fall in the previous quarter, due to lower exports of integrated circuits, personal computer parts and disk drives.

Non-electronic products saw a decline of 11.3 per cent in shipments, after the 4.6 per cent contraction in the previous quarter, attributed to lower exports of structures of ships and boats, primary chemicals and petrochemicals.

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