Singapore’s trade slump set to continue amid US-China tensions, says senior trade official

Singapore’s trade woes are likely to extend into the second half of 2019 due to the impact of US-China trade war, says the city’s permanent secretary for trade
The county’s non-oil exports, weighed down by a slump in electronics, have seen six straight months of decline

US-China trade war

Elaine Chan

Published: 5:15am, 27 Sep 2019

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Export-driven Singapore does not envisage an improvement in its trade performance in the second half of the year, according to a senior trade ministry official, reflecting the gloomy outlook held across Asia as global trade tensions halt a recovery in export growth.

From South Korea’s semiconductors to Singapore’s electronic products, exports are sputtering amid a global contraction in trade brought about by economic and political uncertainties and the trade war between China and the United States.

“We are expecting our trade performance in the second half of this year to be broadly similar to what happened in the first half,” Gabriel Lim, permanent secretary for Singapore’s Ministry of Trade and Industry, told the South China Morning Post recently.

The city state’s non-oil domestic exports, a benchmark indicator, shrank 10.7 per cent in the first half of the year, according to Enterprise Singapore, a government agency.

Due to the deterioration of the trade environment, Singapore’s growth decelerated sharply during the first half of the year, with second-quarter gross domestic product growth falling to 3.4 per cent, compared with 3.8 per cent quarterly growth in the first three months of the year.

Singapore and other Asian export-driven economies, where technology products account for a large proportion of their trade profile, have been squeezed by the electronics down cycle and decreased demand from China, a major importer of components for finished products.

The tariff war between Beijing and Washington, as well as regional tension between Japan and South Korea, has rippled through tightly integrated global supply chains.

The downturn [of the electronics cycle] will definitely reverse itself in time to come. The question is how long it will last

Gabriel Lim

Non-oil domestic exports, weighed down by the slump in electronics, dropped to S$14.3 billion (US$10.4 billion) on a nominal basis in August, a sixth straight month of decline. The city recorded a 8.9 per cent year-on-year decrease, slightly less than July’s 11.4 per cent drop, according to Enterprise Singapore.

Exports of electronic products tumbled nearly 26 per cent in August compared with the same month in 2018, widening from a 24 per cent decrease in July. Integrated circuits, personal computers and disk media products fell 32 per cent, 28.6 per cent and 11.9 per cent respectively, according to official data.

Production output of electronics also plunged 24.4 per cent against the broader 8 per cent decline in overall manufacturing last month.

“The downturn [of the electronics cycle] will definitely reverse itself in time to come,” Lim said. “The question is how long it will last … we are monitoring the situation carefully.”

Non-oil exports are forecast to fall 8 to 9 per cent this year, revised down from an earlier estimated decline of 0 to 2 per cent, according to the Singapore government.

The trade headwinds forced Singapore to slash its 2019 growth forecast range to 0 to 1 per cent in August, down from 1.5 to 2.5 per cent.

Lim said Singapore was now focused on developing and investing in “bright spot growth” areas including information communications technology and financial services, as well as domestic health care sectors that were doing well.

Over time that would change the city state’s economic profile, which he stressed the country was prepared for, but would not change its free trade stance amid growing global tensions and protectionism.

“Our view has always been that [an] open, interconnected, interdependent global economy has benefited all countries,” Lim said, adding that free trade is the best way to develop economies because “we can ensure that countries remain vested in one another’s success and development”.

Lim said current global tensions were “unfortunate” and complex issues that encompassed more than trade.

“Often you can trace some of these to domestic challenges, polarisation of societies, income inequality … As far as we are concerned, we do not think anybody, any country, wins,” he said.

South Korea faces a similar plight to Singapore, with exports in the first 20 days of September falling 21.8 per cent from the same period last year to US$28.54 billion, weighed down by a plummet in semiconductor sales of nearly 40 per cent.

Shipments to China, its largest trading partner, fell 30 per cent compared with a year ago, according to Korea Customs Service data released this week.

The painful reality of slumping demand for electronics contradicts upbeat projections of an imminent recovery of the tech cycle, with Bank of Japan governor Haruhiko Kuroda saying this month that global demand for IT-related goods will bottom out in the second half of the year.

Japan’s exports fell 8.2 per cent in August to 6.14 trillion yen (US$57.2 billion), with the biggest declines coming from computer and semiconductor-related goods, including semiconductor machinery and integrated circuits, as well as car parts.

The deteriorating outlook is reflected in data from the CPB Netherlands Bureau for Economic Policy Analysis’ world trade monitor, which found that global trade momentum declined 0.1 per cent in July, extending the previous month’s decrease of 0.8 per cent.

China’s exports in August fell 3 per cent to US$214.8 billion from the previous month, reversing the short-lived 4 per cent rebound in July. Imports – including components from Asian nations – climbed by 1.7 per cent to US$179.9 billion amid a turbulent year so far.

China bought US$14.49 billion of South Korean goods in August, up slightly from the US$14.48 billion of imports in July. Imports from Singapore, meanwhile, rose to US$3.43 billion, from US$2.9 billion in July.

Hong Kong, which serves as a major transshipment hub for mainland China, said on Thursday that declines in both exports and imports widened in August.

Exports in August fell 6.3 per cent year-on-year to HK$352.7 billion (US$44.9 billion), widening from the year-on-year decrease of 5.7 per cent in July. Imports tumbled 11.1 per cent to HK$380.8 billion last month, compared with August 2018, and the 8.7 per cent year-on-year drop for July.

The Hong Kong Trade Development Council, the city’s trade promotion body, predicted that exports this year would shrink 4 per cent by value, the worst performance since 2009 in the aftermath of the global financial crisis.

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