Singapore is a trade-dependent country. The Republic’s growth prospects are closely tied to the outlook for the global economy and trade. On Thursday (Jan 17), it announced a disappointing export number – fell by 8.5% instead of economists’ expectation of a 2% rise in December. That number is the worst decline in more than two years as shipments of electronics and pharmaceuticals plunged.
Although last month’s drop was lower than the October 2016’s, when its exports declined 14%, the data from trade agency Enterprise Singapore has raised eyebrows. The sharp fall was unexpected. In fact, shipments to all but two of Singapore’s top 10 export markets fell. The only consolation is this – December 2018 was a gloomy month for much of the region.
The exports from its electronics sector tumbled 11.2%, while pharmaceuticals plunged 26.8%. Exports of primary chemicals shed 28% and machinery lost 32.5%. Singapore can conveniently point the finger at China. It wasn’t a coincidence that the mainland China’s December exports unexpectedly fell 4.4% to US$221.2 billion from a year earlier.
The biggest monthly drop in two years for China suggests a slowing growth for the world’s second biggest economy. China’s imports also unexpectedly dropped to US$164.2 billion in December – falling 7.6% – the biggest decline since July 2016. Analysts had expected a 2% rise in export and 4.5% rise in import for the month of December instead.
Hence, Singapore’s December export data was not too surprising, if one correlates its relationship with the Chinese export-import data. However, it also means that the tiny Republic is at the mercy of the US-China trade war. Now, economists and analysts expect the Sino-U.S. dispute to hurt the trade-reliant Singapore in the months to come.
At best, the first quarter (Jan – Mar) could see Singapore’s exports to continue falling as it’s very unlikely both Chinese President Xi Jinping and U.S. President Donald Trump would suddenly stop the trade war. Earlier this month, Singapore admitted that its economy grew slower than forecast in the fourth quarter after the manufacturing sector shrank.
At worst, the December’s weak export numbers may continue into most of 2019. If that happens, it would not only create trouble for the domestic economy, but also affecting the job market. Last year, Singapore Prime Minister Lee Hsien Loong suggested a general election may be called this year, more than a year before his government’s mandate ends in January 2021.
Therefore, if the country’s exports do not improve due to zero progress of trade talks between the U.S. and China this year, Mr. Lee could be in trouble. Sure, his government will not lose power unexpectedly, like his “durian buddy” Najib Razak, the former prime minister of Malaysia who lost his throne in the May 9 general election last year.
But PM Lee may lose more seats that previously thought. Singapore’s central bank – MAS (Monetary Authority of Singapore) – has warned last month (Dec, 2018) that growth may slow to 2.6% in 2019. Selena Ling, an economist at Oversea-Chinese Banking Corp, said growth prospects for the second half of 2019 aren’t good, given the combination of rising U.S. interest rates and a worsening trade war.
Interestingly, although Singapore’s export-driven economy is among the most vulnerable in the ongoing U.S.-China trade conflict, so much so that some investment bankers believe that the tiny but wealthy Southeast Asian country’s gross domestic product could only grow by 2% in 2019 (from 3.3% in 2018), some major investors think the stock market is “very attractive” – especially the banking stocks.
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January 17th, 2019 by financetwitter
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