Published April 15, 2009

Trade forecast cut after Q1 exports drop 26%

Economists say the 17% drop in March indicates exports are bottoming out

By CHUANG PECK MING

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(SINGAPORE) A bigger-than-expected drop in Singapore's trade and exports in the first three months of 2009 has led trade promotion agency International Enterprise (IE) Singapore to trim its full-year growth forecasts.

But at the same time, the latest key non-oil domestic export (NODX) numbers, for March, show the worst may be over for Singapore on the trade front.

On a day when the Ministry of Trade and Industry slashed its 2009 economic growth forecast for the third time to a range of minus-6 to minus-9 per cent, IE Singapore yesterday cut its full-year growth forecast for trade to between minus-25 and minus-22 per cent, from between minus-19 and minus-17 per cent previously.

Related articles: Click here for MTI's news release IE Singapore's news release MAS monetary policy statement

It also clipped its full-year forecast for NODX from between minus-11 and minus-9 per cent to between minus-13 and minus-10 per cent.

The downward adjustments came after total trade in the January-March first quarter tumbled 28 per cent from a year ago, when it rose 16 per cent. NODX went down 26 per cent in Q1, against a 0.6 per cent gain a year earlier.

But last month's NODX - down 17 per cent year-on-year, in an 11th straight monthly decline - is not as bad as it may seem. In fact, the drop eased from sharper falls in the first two months of the year - minus-34.9 per cent in January and minus-23.8 per cent in February. And this has led some private sector economists to conclude that NODX has already bottomed.

'January was the worst month for NODX,' said Citigroup's Kit Wei Zheng. And Action Economics' David Cohen added: 'The 17 per cent drop in March is a sign that exports are bottoming up, and consistent with the picture we've seen in major regional exporting countries like South Korea and Taiwan.

'Taken together, it seems that the first quarter will be the worst and things will start to get better. The trade data is certainly encouraging,' Mr Cohen told Reuters.

Mr Kit noted the 'significant improvement' in March NODX compared to February but is not sure the improvement can be sustained. He is quite sure, though, that the year-on-year numbers will continue to improve, helped by a smaller base.

Month on month, NODX jumped a seasonally adjusted 11 per cent in March, after a 1.6 per cent increase in February.

Electronics shipments, which accounted for just over a third of NODX, fell for a 24th straight month in March. But the 25.7 per cent year-on-year drop was not as steep as February's 31.9 per cent decline.

The 12 per cent fall in non-electronic exports was also better than the 18 per cent decrease the previous month.

Domestic exports to Singapore's top markets continued to tumble in March, except for China and Hong Kong.

Shipments to China rose for a second straight month, increasing 14 per cent to almost $1.5 billion. This made China Singapore's No 2 trading partner after Europe - and relegated the US to third place.

Shipments to Europe sank 22 per cent in March, after a 37 per cent contraction in February. Domestic exports to the US fell 31 per cent, compared with a 44 per cent drop the previous month.