Weak Global Demand Leads to Revised Export Projections for 2023
Singapore has revised its export forecasts for 2023 due to weaker-than-expected trade performance, primarily driven by the manufacturing downcycle and lower oil prices. Non-oil domestic exports (NODX) are now expected to shrink by 9% to 10%, slightly narrowing from the previous forecast of an 8% to 10% contraction. Similarly, total merchandise trade is projected to decline by 9% to 10%, down from an earlier estimate of a 6% to 8% contraction.
Enterprise Singapore (EnterpriseSG) highlighted that the global economic outlook remains weak, which continues to affect both NODX and total merchandise trade. Despite a slight improvement in business sentiment within the manufacturing sector for the second half of 2023, the broader economic uncertainties are weighing on export demand. The ongoing downcycle in the electronics sector, combined with weak demand from key export destinations, has exacerbated the decline in trade performance.
Economists from various financial institutions have expressed cautious optimism about a potential recovery later in the year. Some believe that the semiconductor sector could stabilize, while others expect a gradual rebound in global trade as container throughput improves and US manufacturing investments pick up. However, the export performance remains sluggish for now, and many analysts expect continued contractions for the next few months before any substantial recovery.
In Q2 2023, NODX dropped 13.4% year-on-year, extending the previous quarter’s decline. Both electronic and non-electronic NODX faced significant reductions, with integrated circuits, PCs, and petrochemicals being the main contributors to the downturn. Despite these challenges, there are some signs of stabilization in the quarter-on-quarter data, with a 2.3% growth in Q2 after a 3.2% contraction in Q1.
Overall, Singapore’s trade sector faces continued headwinds, with weaker global demand, particularly from China and other major trading partners, dampening export prospects for the rest of the year. Despite this, some economists believe that a recovery could be on the horizon in Q3, especially with the stabilization of semiconductor sales and improving regional trade activity.
