SINGAPORE has downgraded its 2023 full-year forecasts for non-oil domestic exports (NODX) and total merchandise trade, amid weaker-than-expected performance in the first three quarters. This is mainly due to oil and electronics trade.

NODX is now expected to shrink by 12 per cent to 12.5 per cent year on year (yoy) in 2023, compared with August’s forecast of a 9 per cent to 10 per cent contraction, Enterprise Singapore (EnterpriseSG) said in its quarterly review of trade performance on Wednesday (Nov 22).

Total merchandise trade is projected to shrink by around 10 per cent yoy in 2023, narrowing from August’s forecast of a 9 per cent to 10 per cent contraction.

These moves follow two previous downward adjustments to NODX and total trade growth this year – in May and August.

EnterpriseSG said that oil and electronics trade, respectively, drove 29 per cent and 60 per cent of the total merchandise trade decline in the first three quarters of 2023.

The decline in total merchandise trade has continued in Q3 since the last update, with lower oil prices on the year and weak electronics demand given elevated inventory, it said.

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The agency expects higher oil prices yoy to provide some support to oil trade in nominal terms for the rest of the year, consequently boosting total trade. But this is expected to be moderated by worse-than-expected year-to-date electronics and NODX performance. 

Private-sector economists expect a return to positive yoy NODX expansion in Q4.

DBS economist Chua Han Teng said that while Q3’s NODX slump was the weakest quarterly performance since early 2009, October NODX data suggested a gradual turnaround.

RHB acting group chief economist Barnabas Gan said he expected “continued momentum recovery in Singapore’s externally facing industries”.

Barclays senior regional economist Brian Tan noted “broader stabilisation in the region’s export cycle”.

Maybank analysts Chua Hak Bin and Brian Lee pointed to “a low base and ‘green shoots’ in global electronics demand”.

EnterpriseSG expects a “modest recovery” for 2024. NODX is projected to grow by between 2 per cent and 4 per cent, while total merchandise trade is expected to expand by between 4 per cent and 6 per cent, for the full year.

Higher oil prices will support oil trade and in turn total trade, it said. “Similarly, global electronics demand is projected to gradually recover in 2024, as inventory levels normalise.”

Economists also highlighted the expected recovery in electronics exports.

DBS’ Chua noted a modest turnaround in global semiconductor sales and medium-term optimism on AI-related chips, which point to exports recovering in 2024 – albeit a gradual and fragile one, given lingering geopolitical risks.

The gradual recovery was already hinted at in October’s NODX data, said Barclays’ Tan. Singapore’s export dynamics are tilted towards a better 2024, he said.

HSBC economist Yun Liu said tech-exposed Singapore could benefit from an improvement in the global electronics cycle, though modestly, in 2024.

The Maybank duo expect NODX to rebound to between 7 per cent and 9 per cent in 2024, which they noted was much higher than the “conservative” official estimate.

RHB’s Gan also expects growth momentum in Singapore’s externally facing sectors, including exports, to persist into 2024. He also noted hope for a better economic prognosis for China in 2024, which will support global semiconductor demand.

EnterpriseSG said the International Monetary Fund in its latest October release expected global economic activity to grow 3 per cent in 2023, before slowing to 2.9 per cent in 2024.

It similarly noted that The World Trade Organization forecast global merchandise trade to grow 0.8 per cent in 2023, before rebounding to 3.3 per cent growth in 2024.

Q3 performance review

NODX dropped 18.8 per cent yoy in the third quarter of 2023, extending the previous quarter’s 13.4 per cent decline.

Both electronic and non-electronic NODX declined in Q3. Electronic NODX fell 20 per cent, with integrated circuits, PCs and disk media products contributing most to the fall.

Non-electronic NODX, meanwhile, fell 18.5 per cent. The drop was led by non-monetary gold, pharmaceuticals and specialised machinery.

NODX to Singapore’s top markets declined as a whole in the third quarter, with shipments to all top markets except Hong Kong recording falls. The European Union, Taiwan and Indonesia were the biggest contributors to the decline.

Similarly, on a seasonally adjusted, quarter-on-quarter (qoq) basis, Q3 NODX was down 6.4 per cent, reversing from Q2’s 2.2 per cent expansion. Both electronic and non-electronic NODX fell sequentially.

Total merchandise trade dropped 16.4 per cent on year in the third quarter, after it posted an 18.7 per cent fall in the preceding quarter.

Oil trade declined 25.1 per cent in Q3, following the 30.9 per cent plummet in Q2. Non-oil trade shrank 14.1 per cent, extending the 15.4 per cent drop recorded in Q2.

On a seasonally adjusted qoq basis, however, total merchandise trade increased by 3.2 per cent in Q3, after a 3.7 per cent fall in the previous quarter.

Similarly, total services trade shrank by 1.9 per cent yoy in Q3 to S$189 billion, following the 1.6 per cent fall in the previous quarter.