Published February 18, 2009

Exports fall off a cliff as demand dries up

NODX hit by 35% dive in January; economists predict long squeeze

By CHUANG PECK MING

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(SINGAPORE) Singapore's key non-oil domestic exports (NODX) entered 2009 with a big crash - plunging 34.8 per cent in January - the biggest year-on-year contraction since the series started in 1980.

Domestic shipments to all of Singapore's top 10 markets tumbled, reflecting the global nature of the downturn that has hit this trading nation, which is now in its deepest recession since independence.

Singapore's non-oil exports to the United States, China and Thailand all fell about 50 per cent, and around 40 per cent to Malaysia, Hong Kong, Indonesia, Taiwan and South Korea. Shipments to Singapore's biggest market, the European Union, slipped 13 per cent.

'There is simply no demand,' said Alvin Liew, an economist at Standard Chartered in Singapore.

Added Robert Prior-Wandesforde, senior Asian economist at HSBC Bank: 'If any evidence was required of how widespread the current weakness is, then surely this is it.'

'The largest contributors to the NODX decline were the US, China and Malaysia,' said International Enterprise Singapore, the government trade promotion arm, which released the latest trade figures yesterday.

Total trade, which dropped 19 per cent in December, declined further by 36 per cent last month.

The 35 per cent fall in January's NODX was almost exactly and eerily in line with market expectations - and far steeper than the 21 per cent decrease posted in the previous month.

'The January numbers will have been distorted down somewhat by the timing of the Chinese New Year holidays, which fell in January this year and February 2008, but even so, the picture is not pretty to say the least,' Mr Prior-Wandesforde said.

Wai Ho Leong of Barclays Capital Research agreed: 'The underlying trend remains bearish, even though it was distorted by the Lunar New Year holidays.'

Adjusting for the lower number of working days last month, he estimated that the NODX sank 27 per cent.

Against the previous month, the NODX shrank by a seasonally-adjusted 3.2 per cent in January, having declined 11.4 per cent in December.

'If exports were flat in February and March, at their January level, then they would be down 12 per cent in the first quarter relative to the fourth,' Mr Prior-Wandesforde said. 'This, in turn, would pretty much guarantee a further contraction in GDP - the fifth in the last six quarters.'

The government has tipped that Singapore's gross domestic product will contract by 2-5 per cent this year.

Last month's decline in NODX was generally broad-based - electronics shipments dived 38 per cent, following a 25 per cent drop in December; non-electronic exports tumbled 32 per cent, after a 17 per cent decline in the previous month.

But the decline was due mainly to lower shipments of PC parts (-36.3 per cent), disk drives (-49 per cent) and petrochemicals (-59.7 per cent). Pharmaceuticals posted a stronger showing in January, but not enough to offset the broader fall in electronics and petrochemicals. Economists do not see an end to the NODX's decline any time soon.

'Better days will come, at the earliest, in the last few months of 2009,' said Mr Liew.

Mr Prior-Wandesforde predicted that the 'extreme weakness' in the NODX will extend into the second quarter of the year, 'as global domestic demand continues to crumble'.

'Therefore, however, we would argue the omens are better, largely as a result of the highly synchronised, highly significant easing of monetary and fiscal policy around the region,' he said.

The sharp collapse in commodity prices should also help boost real incomes and profits - and eventually demand for imports.