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Oct exports plunge 12 per cent, further clouding outlook

SINGAPORE — Singapore’s exports plunged to their lowest in seven months in October, surprising economists who are increasingly expressing concern that US President-elect Donald Trump’s protectionist policy stance could pose even further risks to Singapore’s trade outlook. At least one bank slashed its full-year forecast for export growth.

AFP file photo

AFP file photo

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SINGAPORE — Singapore’s exports plunged to their lowest in seven months in October, surprising economists who are increasingly expressing concern that US President-elect Donald Trump’s protectionist policy stance could pose even further risks to Singapore’s trade outlook. At least one bank slashed its full-year forecast for export growth.

On a year-on-year basis, non-oil domestic exports (Nodx) plunged 12 per cent last month, the second consecutive month of contraction, due to a decline in both electronic and non-electronic shipments, trade agency International Enterprise (IE) Singapore said on Thursday (Nov 17).

The figure extends the 5 per cent contraction in September, and is also far worse than the median forecast of a 3.5 per cent contraction expected by economists in a Reuters poll. This is also the seventh time exports have contracted this year.

October’s unexpectedly large decline prompted UOB Global Economics and Markets Research to slash its full-year forecast for Nodx growth to -4.1 per cent, from 2.5 per cent previously.

Last month’s exports were dragged down by pharmaceuticals, one of the most volatile components in the index. The steeper contraction last month was also due to a high base last year, analysts noted.

“To begin with, September-October last year was a high base period which will ‘deflate’ the yearly series this year.

“Markets had expected a decline in the year-on-year series. However, the extent of the decline was more severe than expected. That brings us to the next reason — pharma.

“Exports of pharmaceutical products plunged by 47 per cent year-on-year in the month. This industry is well-known for its volatile and peculiar production cycle. It’s industry specific. It has always been a swing factor in the industrial production figures and it does have similar impact on the export cycle too,” said DBS senior economist Irvin Seah.

The decline in shipments of pharmaceutical products last month led the 14.6 per cent contraction in exports of non-electronic products, which also saw petrochemicals and civil engineering equipment parts decline. In September, the non-electronics segment fell 4.2 per cent.

Meanwhile, shipments of electronic products contracted 6 per cent, following the 6.6 per cent decline in September, due to a drop in the exports of integrated circuits, disk drives and telecommunications equipment.

In terms of geography, exports to the majority of Singapore’s top 10 markets, except Taiwan, Hong Kong and South Korea, fell.

The worst performers were the European Union, Japan and Indonesia.

The outlook remains cloudy for exports going forward, as risks from the US presidential elections, Brexit and China’s slowdown continue to bear on the trade-dependent economy.

“Looking into next year, Trump-style protectionism — if its materialises — will significantly disrupt globalisation and weigh negatively on the Singapore trade nexus, which is already confronted with structural overhang from reduced import intensity in the US and China as well as structurally lower G3 investment. Post-Brexit and ahead of the European elections next year, free trade has scarce political support. Restrictions on trade will more than negate any positive growth spillover from the US fiscal stimulus,” said ANZ economist Ng Weiwen.

Mr Seah added: “Signs of improvement are tentative at present and it doesn’t help when there are substantial seasonal factors masking any clue of a turnaround, particularly at the tail-end of every year and right through the beginning the following year. As the saying goes, only time will tell.”

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