UOB’s senior economist Alvin Liew has raised his full-year growth forecast for Singapore’s non-oil domestic exports (NODX) to 5% for 2022, from his previous forecast of 2.0%.
The revised forecast is at the top end of Enterprise Singapore’s (ESG) projection of a 3% to 5% growth for the year, which was upgraded from 0.0% to 2.0% on May 25.
Liew’s upgrade comes after Singapore’s May NODX rose 12.4% y-o-y, higher than the market forecast of a 7.5% y-o-y growth.
“On a seasonally adjusted basis, NODX rose 3.2% m-o-m, against [an] expectation of 2.1% rise and the 3.3% drop in April, reversing a three-month declining streak,” Liew writes in a June 17 note.
In spite of the ongoing Russo-Ukraine war, elevated commodities prices, tightening monetary policy stance globally and concerns over a potential US recession, the analyst is optimistic on Singapore’s “robust performance”, which is “likely” to carry over into the second half of the year due to the recovery of regional economies and China’s emerging from its Covid-19 lockdowns.
Upside surprise for NODX ‘supportive’ for ‘decent’ 2Q GDP report: ING
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ING’s senior economist in the Philippines, Nicholas Mapa, has deemed the stronger-than-expected gain in May’s NODX as “supportive” for a “decent” 2Q GDP report.
“Accelerating inflation will likely sap some momentum from retail sales but at least for now, both exports and industrial production have held up pretty well,” he writes in his June 17 report.
Mapa is keeping his GDP forecast at 4.5% for the 2Q2022, which he sees, should also benefit from base effects.
“In the near term, NODX will likely continue to expand, but slowing global trade trends will likely begin to manifest in future NODX releases,” he says.
“Going forward we could see moderate growth for exports bound for China in the near term as it follows a more flexible zero-Covid policy,” he adds.
Maybank Securities sees recession risks rising in 2023 - 2024
Maybank Securities analysts Chua Hak Bin and Lee Ju Ye are keeping their NODX growth forecast at 4% to 6% for 2022. They are also retaining their GDP growth forecast at 2.8% after the release of Singapore’s May NODX numbers.
However, the analysts see headwinds including the Russo-Ukraine war, China’s slowdown, and global monetary tightening may dampen the recovery in the second half and weigh on global trade.
In addition, the risks of a recession in the US and Singapore in 2023-2024 are rising with the more aggressive Fed rate hikes, note the analysts in their June 17 report.
As the latest Fed dot plot is guiding for another 175 basis point hike to 3.5% at end-2022 and 3.75% at end-2023, Chua and Lee are upping their three-month SIBOR forecast to 3% from 2.3% in 2022, and to 3.2% in 2023 from 2.8%.
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They are also raising their three-month SORA forecast to 2.75% from 2.05% in 2022, and to 2.95% from 2.55% in 2023.
“Singapore corporates and households should brace for a big interest rate shock, as Singapore short-term interest rates will move sharply higher given the Fed’s aggressive rate hikes. Mortgage rates could climb to about 4% by year-end and near 4.5% in 2023, levels not seen for almost two decades. Rising financing costs will likely eat into consumer budgets and cool the property market,” the analysts write.
CGS-CIMB sees bright spots from China’s reopening but global slowdown expected to weigh on growth
CGS-CIMB Research economist Nazmi Idrus sees China’s reopening in June as a bright spot for Singapore’s export growth.
“China has eased more restrictions beginning in June, which should result in a strong pickup in trade in the months ahead as more factories ramp up production. This should bode well for Singapore’s and regional trade,” he writes.
However, given Singapore’s position at the centre of the global supply chain, the possible slowdown in global demand could weigh on its outlook.
“Thus far, this has not been obvious, but we may be at a crucial turning point,” says Idrus.
“Although a pickup in China post reopening in June could offset the moderation from the rest of the world in the short term, we fear a slowdown in the US and Europe will likely become increasingly evident towards the later part of the year as consumer spending runs out of steam amid aggressive rate hikes,” he adds.
