SINGAPORE: Singapore’s exports fell sharply in August on weak demand from China and Europe, official data showed on Thursday, raising the odds of a technical recession for the trade-reliant economy in the third quarter.
Non-oil domestic exports tumbled 8.4 percent from a year ago, the trade promotion body International Enterprise (IE) Singapore said, steeper than what analysts’ predicted and reflecting a general slowdown in Asian exports due to softer global demand.
The “poor export performance in August has pushed the economy closer to a technical recession,” DBS Bank said in a market commentary.
“This is significantly higher than market expectations of a 3.5-percent decline.”
It added that “external headwinds arising from the deceleration in China’s growth would be the key reason behind the dire outcome.”
Singapore’s gross domestic product (GDP) contracted 4.0 percent quarter-on-quarter in the three months to June, prompting the government to cut its official GDP growth forecast this year to 2.0 percent to 2.5 percent from 2.0 percent to 4.0 percent previously.
A similar contraction in the third quarter ending September means the economy would be in technical recession, defined as two consecutive quarters of quarter-on-quarter fall in GDP. It is milder than a full blown recession.
Bank of America Merrill Lynch said the August numbers “dashed hopes of an export recovery” for Singapore, a small and open economy heavily dependent on external trade.
“The odds are more than even that the Singapore economy slipped into a technical recession . . . in the third quarter, in our view,” it said in a note.
The weak export numbers were dragged down by falls in exports of electronic products such as integrated circuit parts, computer components and disk drives, as well as non-electronic items such as petrochemicals and pharmaceuticals.
Official data showed that exports to China fell 8.2 percent in August, accelerating from a 1.6-percent decline in July.
Exports to Europe shrank 9.0 percent and shipments to Japan contracted 8.1 percent, but exports to the US rose 8.8 percent.
“The sharper-than-expected [exports]decline in August brought back fears on the global growth slowdown that is tied to the lackluster growth in China, as well as in Europe—both of which are Singapore’s largest exporting partners,” United Overseas Bank said in a note.
Some analysts said the exports decline could lead the Monetary Authority of Singapore, the city-state’s central bank, to ease monetary policy during an October meeting.
A weaker Singapore dollar would make the country’s exports more price competitive in the global market.