Monday, 26 Oct 2020

Singapore's weak non-oil exports likely to persist, say analysts

Singapore’s non-oil domestic exports (Nodx) are likely to remain weak in the months ahead given slow global growth and rising trade tensions, say observers.

They cited the cyclical slowdown in the electronics market worldwide and the United States-China tariff war as key challenges.

OCBC Bank economist Howie Lee said that the US’ multiple trade barriers “are likely to crimp global disposable income, dampening worldwide demand for smartphones and PCs, and pushing the highly cyclical electronics industry into an even deeper downturn”.

Ms Joanne Guo, the Singapore Business Federation’s assistant executive director for strategy and development, said some companies are trying to cope with the volatility of the tariff war by exporting from either local or overseas factories to avoid levies.

She added that some Singapore companies have said that as a result of the tariff war, when they export to the European Union, they may be faced with safeguard measures meant to protect EU domestic industries, which in turn increase their costs.

The slowdown in manufacturing is also affecting workers here, as shown by labour market figures from the Manpower Ministry last week. Retrenchments rose in the first quarter compared with the previous three months and the first quarter of 2018.

The increase was driven by manufacturing and affected mainly production and related workers in the electronics sector.

The seasonally adjusted number of job vacancies also fell for the first time in two years.

DBS senior economist Irvin Seah said: “The drag on the labour market is gradually intensifying, and the outlook on the employment front is getting dimmer.”

NTUC assistant secretary-general and United Workers of Electronic and Electrical Industries executive secretary Melvin Yong said many electronics companies are adopting a “wait and see” approach, and have become more cautious in their production projections and purchasing orders.

There may be temporary res-pite on the Nodx front this month, however, said Nomura research analysts Euben Paracuelles and Charnon Boonnuch.

They said China’s front-loading of exports to the US ahead of proposed further tariff increases may temporarily create demand for exports from Singapore, given the country’s role in the regional supply chain.

Another silver lining is that on a seasonally adjusted basis, the level of Nodx reached $14.1 billion last month, higher than April’s $13.2 billion, and appears to have bottomed out, said DBS’ Mr Seah.

“If we can sustain this month-on-month improvement, hopefully later this year, we can see year-on-year change return to positive growth, though a lot depends on trade negotiations between the US and China,” he said.

The slowdown in manufacturing is also affecting workers here, as shown by labour market figures from the Manpower Ministry last week. Retrenchments rose in the first quarter compared with the previous three months and the first quarter of 2018.

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