SINGAPORE — Signalling that non-electronic products may mitigate the protracted slump the Republic has faced in sales of locally produced goods to overseas markets, IE Singapore yesterday revised its 2016 exports forecast to reflect a narrower decline while warning that global growth remains clouded with uncertainties.

Non-oil domestic exports (NODX) are now expected to contract between 3 and 4 per cent this year, the trade agency said, a slight improvement from its previous forecast of a 3 to 5 per cent decline.

Despite the forecast revision, market watchers noted that the outlook is still one of contraction, and weak global growth and external challenges could continue to affect demand for goods.

“The first thing to note is that while the NODX forecast has been revised to a narrower decline, it is still in contraction. This reflects the challenging external environment Singapore operates in,” said IG market strategist Bernard Aw.

DBS senior economist Irvin Seah also pointed to the poor showing in the second half of last year, noting that the low base will provide some technical lift for exports in the corresponding period this year.

NODX contracted 2.8 per cent year-on-year in the second half last year after rising 2.7 per cent in the first six months.

“There’s nothing much to cheer about; it’s still a fairly gloomy outlook. I think external demand will remain sluggish and weak,” said Mr Seah, citing China’s slowdown from an ongoing economic reform and possible impact from Britain’s exit from the European Union (EU), or Brexit.

“Ultimately Singapore is externally driven … The only bright spark is a firmer recovery in the United States. But the risk is the upcoming election and how consumers and markets will react.”

In its report yesterday, IE Singapore noted that while a modest improvement in the US economy is anticipated, uncertainties arising from the Brexit vote and an expected moderation of China’s economic growth in the second half of this year are likely to continue to weigh on Singapore’s external environment.

“Global growth remains clouded with uncertainties and is projected to remain sluggish in 2016,” IE Singapore said in its second-quarter trade performance review. But notwithstanding the sluggish global outlook, “there are potential upsides in the export performance of non-electronic Nodx”, IE Singapore said, explaining why it narrowed the upper end of the forecast range.

Non-electronic goods also played a big part in helping Nodx break three consecutive quarters of contractions to post flat growth on a year-on-year basis in the March-to-June period, in contrast to the first quarter’s 9 per cent decline.

The segment rose 2.1 per cent in the second quarter, in contrast to the 11.3 per cent contraction in the previous quarter, on greater demand for civil engineering equipment parts (+164 per cent), non-monetary gold (+228.7 per cent) and pharmaceuticals (+7.3 per cent).

Shipments of electronic products, on the other hand, fell 5.1 per cent, extending the first quarter’s 3.4 per cent decline, on weaker demand for PCs (-25.6 per cent), parts of PCs (-15.1 per cent) and disk drives (-20.9 per cent).

Overall, exports to half of the Republic’s top 10 markets saw positive year-on-year growth in the second quarter — up from two markets in the first quarter — with the exceptions being China, Indonesia, South Korea, Japan and Thailand.

The biggest contributors to Nodx expansion were the US and Taiwan, where shipments rose 2.4 per cent and 3 per cent respectively, compared with -3 per cent and -18.5 per cent in the first quarter.

Mr Aw said the coming months could see demand increase from more of Singapore’s major trading partners, amid possible increase in fiscal stimulus. He cited Japan as one possibility.

And while Nodx to the EU’s 28 member states may falter in momentum post-Brexit, it may not be as deleterious as initially feared, noted Ms Selena Ling, head of treasury research and strategy, OCBC Bank.

“Given that 1H16 Nodx fell by 4.5 per cent year-on-year, the full-year Nodx forecast adjustment by IE Singapore was to account for potential upsides from non-electronics Nodx ... Second-half Nodx growth could remain in contraction territory, but may subside by a less severe 2.2 per cent year-on-year in the fourth quarter following an expected 4.8 per cent decline in the third quarter,” said Ms Ling, adding that exports of pharmaceuticals and disk media products could lend some support in the second half.