Singapore cuts 2020 forecasts for NODX, total trade again on back of COVID-19 hit, lower oil prices
SINGAPORE: Singapore has cut its forecasts for non-oil domestic exports (NODX) and total merchandise trade for 2020 again, on the back of a more severe hit from the COVID-19 pandemic and lower oil prices.
NODX is now tipped to fall between 1 and 4 per cent this year, while total merchandise trade is set for a more drastic decline of between 9 and 12 per cent, trade agency Enterprise Singapore (ESG) said on Tuesday (May 26).
Just three months ago, both metrics were expected to grow between -0.5 and 1.5 per cent this year.
READ: Singapore's GDP expected to shrink between 4% and 7% as growth forecast cut again on COVID-19 impact
This earlier forecast, according to ESG, was premised on a dampening of growth prospects for China with knock-on impact on regional economies, weakened consumer and business sentiments, as well as a drag from plunging oil prices.
But both the external economic environment and oil prices have further deteriorated since then.
“The global economy and trade are now expected to contract instead of grow in 2020 amid an escalation of the COVID-19 outbreak worldwide since February, with dampened outlook for most of our key trade partners,” ESG said in its media release.
Latest projections from the International Monetary Fund (IMF) now see the global economy declining by 3.0 per cent in 2020, a tick below the earlier 3.3 per cent growth estimate as the outlook was downgraded across advanced, emerging and developing economies, it said.
On the trade front, the World Trade Organization (WTO) expects world merchandise trade volumes to contract between 13 and 32 per cent in 2020, in contrast to the 2.7 per cent growth earlier estimated.
ESG also expects lower oil prices to weigh on Singapore’s oil trade in nominal terms and in turn, total trade in 2020.
It noted how the Energy Information Administration downgraded this year’s oil price forecast to US$34 a barrel in May, nearly half of its US$61 a barrel forecast in February.
READ: Singapore will enter a recession this year, ‘significant uncertainty’ over duration and intensity - MAS
The downgrades came despite NODX posting a 5.8 per cent year-on-year increase in the first three months of 2020. This was largely due to increased shipments of non-electronic products on the back of a low base a year ago, although electronic exports declined.
Exports of non-electronic products rose by 8.1 per cent over the year in the first quarter, improving from the 0.3 per cent decrease in the earlier quarter, thanks to surges in specialised machinery, non-monetary gold and pharmaceuticals.
Electronics exports fell 2.3 per cent year on year in the first quarter, as integrated circuits, personal computers and other electronic peripherals declined.
As a whole, NODX to the country’s top markets grew during the January to March period, with the biggest contributors being the United States (+23.1 per cent), Thailand (+46.9 per cent) and the European Union (+15.1 per cent). On the other hand, shipments to China, Hong Kong, Malaysia and Indonesia fell.
Total merchandise trade, which excludes services, also posted growth – up 0.6 per cent in the first quarter, reversing from the 5.3 per cent drop in the previous quarter.
This was due to a 4.5 per cent increase in non-oil trade which outweighed the decline in oil trade, ESG said. Oil trade fell 15.9 per cent in the first quarter amid lower oil prices compared to a year ago.
Meanwhile, total services trade declined by 3.5 per cent to hit S$129.5 billion for the quarter, with both services exports and imports decreasing by 2.9 per cent and 4.2 per cent, respectively.
Separately, the Ministry of Trade and Industry has cut Singapore’s growth projections for 2020 yet again, in anticipation of the country's worst-ever recession.
Singapore’s gross domestic product (GDP) is now expected to shrink between 4 and 7 per cent this year, down from the previous projected range of a contraction between 1 and 4 per cent.