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Singapore Cuts Trade Outlook As China Slowdown Caps Recovery
Perspective | 16 August 2013

Singapore lowered its forecast for exports this year as a slowing expansion in China crimps demand for the nation’s goods, even as services helped the economy grow more than initially estimated last quarter.

Non-oil domestic exports (NODX) may be unchanged or rise 1 percent this year, compared with a previous forecast of 2 percent to 4 percent, the trade promotion agency said in a statement released on 12 August. Gross domestic product (GDP) rose an annualised 15.5 percent in the three months through June from the previous quarter, when it grew a revised 1.7 percent, the Trade Ministry said separately.

Southeast Asian nations from Malaysia to Indonesia have seen exports slump as growth slows in China while Europe and Japan struggle to sustain economic recoveries. Singapore’s exports in June extended the longest run of declines since the global financial crisis as electronics dropped for an eleventh month.

“While we are seeing surer signs of bottoming in some places in the world economy, there is no guarantee of a sustained and accelerating recovery from here,” said Vishnu Varathan, an economist at Mizuho Bank in Singapore. “Looking at the export sector, it’s premature to declare we are out of the woods. Singapore’s growth support is coming from the services sector.”

The median estimate in a Bloomberg survey of 11 economists was for a 14.2 percent increase in quarter-on-quarter GDP, and a previous forecast by the government was for a 15.2 percent expansion.

Japan Slows
Data released in Japan on 12 August showed the world’s number three economy slowed more than forecast in the second quarter as housing and business investment declined. GDP rose an annualised 2.6 percent, after gaining 3.8 percent the previous quarter.

The Monetary Authority of Singapore stuck to a policy of allowing gradual gains in its currency in April as inflationary pressures curbed scope for monetary stimulus. That stance remains appropriate, central bank deputy managing director Ong Chong Tee told reporters on 12 August.

Singapore’s Prime Minister Lee Hsien Loong raised his forecast for economic growth to a range of 2.5 percent to 3.5 percent this year, up from 1 percent to 3 percent. The economy expanded 2 percent in the first half, Lee said in a televised message on 8 August, on the eve of the country’s National Day.

Global Uncertainties
“We have made steady progress this past year,” said Lee, 61. “Our economy is holding steady amidst global uncertainties. We are attracting more quality investments. Unemployment remains low.”

GDP expanded 3.8 percent last quarter from a year earlier, better than the 3.7 percent estimated previously, the report dated 12 August showed.

The International Monetary Fund lowered its 2013 global growth forecast last month as China’s economy levels off and Europe’s recession deepens. China’s GDP rose 7.5 percent in April-to-June from a year earlier, down from 7.7 percent in the first quarter, extending the longest streak of sub-8 percent expansion in at least two decades.

“As China adjusts its policies to promote more sustainable growth, unintended consequences, such as an excessive tightening of liquidity, could lead to a sharp slowdown in growth,” Singapore’s Trade Ministry said on 12 August. “This could in turn have spill-over effects on other export-oriented Asian economies.”

Export Volatility
Singapore’s exports to the world’s largest economy fell for a second month in June. The US was Singapore’s fifth-biggest trading partner in 2012 after Malaysia, the European Union, China and Indonesia. Swings in demand for pharmaceuticals can make Singapore’s export figures volatile.

The “export outlook hasn’t been faring well over the last couple of months because we are undergoing a down cycle in pharmaceuticals and electronics,” Irvin Seah, a Singapore-based economist at DBS Group Holdings, said before the 12 August report. The government may have been “a bit biased to the upside with the export forecast” previously, he said.

Manufacturing gained 0.2 percent from a year earlier in the three months ended 30 June, compared with a July estimate of a 1.1 percent expansion. The services industry grew 5.5 percent last quarter from a year earlier, while construction expanded 5.1 percent.

NODX have “yet to show signs of rebound though the year-on-year decline in NODX has moderated in the second quarter of 2013,” the government said on 12 August. “Despite this, Singapore’s trade and NODX are still expected to pick up modestly in tandem with the projected gradual recovery in global demand.”

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