Exports lurch to worst showing in five years

NODX hit by electronics slump; jury still out on 2008 as US slowdown looms

(SINGAPORE) Even the economists were caught off-guard. They had expected Singapore's key non-oil domestic exports (NODX) in December to grow at a healthy clip, compared to a year ago. Instead, they fell 4.5 per cent on the heels of a 3.4 per cent drop in November.


This unexpected slowdown meant that, for the year as a whole, NODX put on its worst showing in five years.

As all eyes turn to 2008, there appears to be a difference of views between the official assessment and what economists in the private sector feel.

International Enterprise Singapore, the government trade promotion agency, yesterday said things are likely to get better on the trade front this year. Other economists are less sanguine.

The NODX expanded just 2.3 per cent from a year ago in 2007, when IE Singapore expected it to grow 4-6 per cent, after trimming its forecast from 7-9 per cent in July. This key barometer had risen 8.5 per cent in 2006.

Last year's disappointing export performance came despite a robust growth in the overall economy, which put on 7.5 per cent gains. IE Singapore tips the NODX to grow in line with the larger economy in 2008 - by 4-6 per cent, against a 4.5-6.5 per cent growth forecast for the economy.

Overall trade, which increased 4.5 per cent to $846 billion in 2007, is likely to expand a bit faster at 6-8 per cent.

Economists in the private sector, meanwhile, feel that the looming recession in the United States could hit Asian exports.

'Looking forward, the 2008 outlook is definitely getting less sanguine,' said Selena Ling of OCBC Bank. 'Given the slowing global economy and the increased risk of the US economy sliding into a recession, the external demand outlook would be dampened.'

OCBC is projecting the NODX to grow 4-5 per cent this year, but may revise it after reviewing the NODX data in the first three months. The present signs are not encouraging.

The NODX has dropped sharply over the past two months, even though the median estimate by private sector economists was that it would register a 5.3 per cent increase in December.

IE Singapore, which sees the NODX performing better this year, could not say when the turnaround will come. While indicating that its projection is conservative and wide enough to accommodate a slowdown in the world economy, IE Singapore's chief executive Chong Lit Cheong said the agency is prepared to trim its trade forecast - especially if US growth forecast falls below the 1.5-2.0 per cent range.

While China overtook the US last year as Singapore's third largest trading partner - after Malaysia and the European Union - Mr Chong said it is still a 'very significant' market for Singapore. Many of Singapore's exports to China and other markets in the region eventually ended up in the US.

In fact, along with South Korea and Malaysia, the US was the biggest contributor to NODX's growth in 2007. Exports to the EU, Japan, Hong Kong, Indonesia and Taiwan also sank

For 2008, IE Singapore is riding its hope on a recovery in electronics shipments; stronger exports in chemical products, especially pharmaceuticals and petrochemicals; and still-robust economic growth in Asia to take up the slack in the US and EU.

Poor electronics exports was a key reason for the NODX's poor performance last year. Shipments fell each month since February as a global inventory glut pushed down prices of memory chips and microprocessors. For the year, electronic exports fell 9.2 per cent from 2006.
Mr Chong sees chip prices bottoming and an electronics pickup in the second half of 2008. Bigger pharmaceutical output could provide an extra boost.

More pharmaceutical plants have been built in Singapore since 2004 - up from 25 to 42 today - and many will be rolling out production this year, Mr Chong pointed out.