Export Growth Slumps To Slowest Pace In Five Years

Source : The Straits Times, Jan 18, 2008

2.3% figure is well under official forecasts of between 4% and 6% growth

A SURPRISE contraction last month capped a disappointing year for Singapore exports, which missed official targets as growth slumped to its slowest pace in five years.

Expansion last year hit just 2.3 per cent, well under official forecasts of between 4 and 6 per cent and small change compared with the 8.5 per cent growth in 2006.

Last month's dismal figures reflect the wider downturn: Overseas sales of goods made here shrank for the second straight month, contracting 4.5 per cent against expectations for at least 5 per cent growth.

Pharmaceutical exports disappointed, failing to recover from a surprise contraction in November, while the electronics sector shrank for the 14th time in 15 months.

Economists had expected a rebound from November's 3.4 per cent contraction. A better December trade figure could have signalled that overall economic growth for the fourth quarter was better than an early estimate of 6 per cent.

But the dismal data out yesterday dashed such hopes, pointing instead to yet another weak month for manufacturers.

It has cast a pall over the new year, but trade agency IE Singapore is predicting a turnaround, forecasting export growth of between 4 and 6 per cent this year.

This is despite expectations that growth in all of Singapore's main markets will slow.

The trade agency is pinning its hopes on a long-overdue global technology recovery to provide enough boost to achieve its target.

'GDP growth of our trading partners will moderate, but we are hopeful that the other engines of growth for trade can help us,' said IE chief executive Chong Lit Cheong.

Exports last year were a major letdown. Growth was only 2.3 per cent - mainly because of shrinking exports of semiconductors, disk drives and telecom equipment. The number paled beside the 3 per cent predictions of many market economists.

Electronic exports shrank 9.2 per cent last month, as well as for the whole year.

'The electronics sector remains firmly in the doldrums,' said HSBC economist Robert Prior-Wandesforde. Much of this was due to a prolonged downturn in the global electronics cycle, he said. 'But Singapore has fared a lot worse than other tech-heavy countries, hinting at some more fundamental problem.'

By contrast, pharmaceuticals helped hold up overall exports, jumping 21 per cent for the whole of last year.

But a failure last month by the notoriously volatile sector to rebound from a surprise November contraction kept overall exports in the red for a second straight month.

IE is counting on a global chip recovery in the second half of this year to boost local electronic exports. Industry forecasts predict global chip sales to grow 6 to 9 per cent this year, up from last year's 3 to 4 per cent.

Two new pharmaceutical plants coming on stream this year could boost drug exports, said Mr Chong.

But all eyes are on the US, Singapore's No. 2 export market after Europe, which may be sinking into a recession. Mr Chong said IE's forecast may be revised if the country's economic outlook worsens from the agency's 1.5- to 2-per-cent forecast.

Indeed, some analysts said the IE growth target is ambitious. 'My best guess is that exports will grow 2 to 4 per cent, given our view of US growth at 0.5 per cent,' said Standard Chartered Bank economist Alvin Liew.