Industry Overview: Singapore Exporters 2014
A Qualitatively Healthier Growth
Development in advanced global economies was generally weaker in 2013 than was expected, with the US yet to solve its fiscal impasse and with the weak domestic demand in Europe. The Singapore economy is expected to show slow recovery of 3.5 to 4 per cent in 2013. Gradual growth of 2 to 4 per cent is also to be expected in 2014.
As Singapore’s economy matures, Trade and Industry Minister Lim Hng Kiang believes that a “slower but qualitatively better growth” is to be expected. Despite that, the nation-state continues to take the top spot in The World Bank’s Ease of Doing Business report. A high ranking on the ease of doing business index denotes that the regulatory environment is more conducive to the starting and operation of a local firm. Singapore is also ranked as the second most competitive economy in the world on the Global Competitiveness Index 2013–2014 rankings, scoring high in the areas of economic performance, government efficiency, business efficiency and infrastructure.
Gradual Economic Growth
Based on the Ministry of Trade and Industry’s (MTI) advance estimates, it expects the Singapore economy to grow by 3.5 to 4 per cent in 2013, and 2 to 4 per cent in 2014. On a year-on-year basis, the Singapore economy grew by 5.8 per cent in the third quarter of 2013 as compared to the 4.4 per cent growth in the preceding quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy grew at a slower pace of 1.3 per cent, after expanding 17.4 per cent in the previous quarter.
The manufacturing sector grew by 5.5 per cent in the third quarter of 2013, higher than the 1.3 per cent growth in the preceding quarter. The improvement was due to stronger growth in the electronics cluster and a sharp rebound in the transport engineering cluster. Meanwhile, the construction sector grew by 5.3 per cent in the third quarter, lower than the 6.9 per cent growth from the previous quarter. The slowdown was mainly attributed to weaker growth in public non-residential building works.
Based on the International Enterprise Singapore’s 2013 third quarter trade performance review, Singapore’s total external trade increased by 6 per cent in the third quarter of 2013, following a 2 per cent decrease in the previous quarter. Total trade reached S$254 billion in the third quarter of 2013, higher than the previous quarter’s achievement of S$246 billion. In the third quarter of 2013, total exports and total imports rose by 6.1 per cent and 5.9 per cent respectively.
The total trade’s year-on-year increase can be attributed to the expansion in both oil and non-oil trade. Oil trade grew by 10.9 per cent in the third quarter of 2013, after a decrease of 10.8 per cent in the previous quarter. Non-oil trade rose by 4.1 per cent in the third quarter of 2013, following the previous quarter’s 1.7 per cent increase.
Oil Domestic Exports
On a year-on-year basis, oil domestic exports increased by 17.9 per cent in the third quarter of 2013, after a decline of 10.7 per cent in the second quarter. In terms of volume, oil domestic exports rose by 21.4 per cent in the third quarter of 2013, in contrast to the 3 per cent decline in the previous quarter.
Non-Oil Domestic Exports
The non-oil domestic exports (NODX) declined by 3.3 per cent in the third quarter, following the previous quarter’s 5.2 per cent contraction, on lower shipments of both electronic and non-electronic NODX.
Electronic domestic exports decreased by 8.7 per cent in the third quarter, following the previous quarter’s 11.5 per cent contraction. Non-electronic NODX declined by 0.6 per cent in the third quarter of the same year, following the 1.9 per cent decrease in the previous quarter.
NODX to China, US, Thailand and Hong Kong increased, while NODX to all the rest of the top markets declined in the third quarter of 2013. The biggest contributors to the NODX contraction in the third quarter were the EU 27, South Korea and Taiwan.
On a year-on-year basis, domestic exports of electronics declined by 8.7 per cent in the third quarter, following the decrease of 11.5 in the second quarter. The NODX contraction can be attributed to lower domestic exports of ICs (-9.2 per cent), parts of PCs (-23.8 per cent) and disk media products (-26.3 per cent).
Non-oil re-exports (NORX) rose by 11.7 per cent in the third quarter of 2013, after the previous quarter’s rise of 12.2 per cent. The rise in NORX can be attributed to the growth in both the electronic and non-electronic NORX.
Electronic NORX increased by 19.7 per cent in the third quarter, following a 16.3 per cent rise posted in the preceding quarter. This is due to higher re-exports of ICs (+28.1 per cent), parts of ICs (+38.8 per cent) and telecommunications equipment (+12.1 per cent).
Non-electronic NORX increased by 3.9 per cent in 3Q 2013, after the previous quarter’s expansion of 8.2 per cent. The rise in non-electronic NORX was due to higher re-exports of non-electric engines & motors (+54.7 per cent), jewellery (+47.2 per cent) and nickel (+414.4 per cent).
Growing Worldwide Network
Minister Lim also noted that Singapore has the most extensive network of free trade agreements (FTAs) in Asia, and will continue to expand this network.
On 1 September 2013, the Gulf Cooperation Council - Singapore Free Trade Agreement (GSFTA) entered into force. This Agreement will further enhance Singapore’s flourishing economic and trade relations with the Gulf Cooperation Council (GCC) which consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). It is important to note that Singapore is the first non-Middle East country to have a Free Trade Agreement (FTA) with the GCC. This is already Singapore’s second FTA with the Middle East – the first one being the Singapore-Jordan FTA in 2004.
Meanwhile, the European Union (EU) - Singapore Free Trade Agreement (EUSFTA) is moving a step closer to ratification with the finalisation of the legal text. The EUSFTA will be a very significant milestone for Singapore and the European Union to strengthen our trade and economic ties.
On 7 November 2013, the Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership (ASTEP) was signed. The signing of the Agreement was done in Singapore by the Trade Representative of the Singapore Trade Office in Taipei, Mr Calvin Eu and the Representative of the Taipei Representative Office in Singapore, Mr Hsieh Fa-dah. Minister Lim believes that the ASTEP is a “high-standard and comprehensive agreement that will strengthen the economic relations between Singapore and Chinese Taipei, both members of the World Trade Organisation (WTO).
According to MTI, the global economic outlook is expected to grow modestly in 2014. The growth outlook for the Singapore economy also remains modest. Externally-oriented sectors such as manufacturing and transportation & storage are likely to provide support to growth, in line with the recovery in global demand. However, some labour-intensive domestically-oriented sectors may see their growth weighed down by tightness in labour market conditions.
Despite this, there is still a degree of uncertainty. In the US, the eventual tapering of QE3 and the debt ceiling issue might affect markets. In Europe, there could be a recurrence of sovereign debt crises in the peripheral economies. In China, policy adjustments to rebalance the economy might lead to unintended consequences of a sharper-than-expected slowdown in growth. Should any of these risks occur, Singapore’s trade forecasts would be lowered.
Another factor is the very slow recovery of the Eurozone economy, which is expected to grow by 1 per cent in 2014, after an expected 0.4 per cent decline in 2013. Most Asian economies, however, are expected to grow in 2014 at a slightly faster pace than 2013. Meanwhile, China is expected to see slightly lower growth in 2014 compared to 2013 since it is in the process of rebalancing its economy.
The US economy is expected to have a moderate growth of 2.6 per cent in 2014. This is higher than 2013’s expected growth of 1.6 per cent. The downside risks in the US include delays in the raising of the debt ceiling in February 2004 and tightening of its fiscal conditions.
Sources: International Enterprise (IE) Singapore and Ministry of Trade and Industry (MTI)Singapore. For more information, please visit IE Singapore’s website at www.iesingapore.gov.sg or MTI’s website at www.mti.gov.sg.