Singapore’s non-oil domestic exports (NODX) fell more than expected last month, raising the prospect of the city-state entering into a recession as exports to the EU plunged.
The trade-dependent Southeast Asian city-state said yesterday NODX fell 10.6 percent from a year earlier, hurt by a 10.4 percent drop in electronics and a 28.7 percent plummet in shipments to the EU, its largest market.
On a seasonally adjusted month-on-month basis, NODX shrank 9.1 percent after contracting 3.6 percent in July.
Electronics exports contracted 14.8 percent last month from July after seasonal adjustments, while non-electronics NODX shrank 7.1 percent, trade agency International Enterprises Singapore said in a separate e-mail.
“Although our baseline case is not for a quarter-on-quarter contraction, the chances are not minute. There is perhaps a 40:60 chance of contraction,” Oversea-Chinese Banking Corp treasury research head Selena Ling said.
Singapore’s economy shrank less than anticipated in the second quarter, thanks to a surge in pharmaceutical production in June, GDP data showed last month.
However, the government warned of continued uncertainties and downside risks and narrowed its growth forecast to between 1.5 percent and 2.5 percent for this year from an earlier 1 percent to 3 percent.
Economists expect the Singapore’s GDP to grow 2.4 percent this year, down from a median estimate of 3 percent three months earlier, the central bank’s latest quarterly Survey of Professional Forecasters showed.
Looking ahead, economists said the weak trade data reinforced the widely held perception that the Monetary Authority of Singapore (MAS), the country’s central bank, will likely ease monetary policy slightly next month by slowing the local dollar’s rate of appreciation.
“With these kinds of numbers, growth momentum appearing to slow down and inflation less of an issue, MAS could look at a gentler slope of appreciation,” CIMB regional economist Song Seng Wun said.
However, Ling said that MAS, along with its regional peers, would be cautious about easing policy too rapidly given the risk of asset appreciation fueled by the US Federal Reserve’s latest round of quantitative easing (QE).
“Asian central banks are worried about the QE side of things and what it may do to asset inflation,” she said.