2. FALL IN GLOBAL TRADE
As economic growth slows, global trade and demand will inevitably take a hit.
RHB’s senior economist Barnabas Gan is expecting the decline in global trade demand to persist over the next three to six months.
Among Singapore’s key external demand markets, the outlook for the United States and eurozone economies is “weak” as tight financial conditions dampen consumption and investment spending, MTI said.
The US and the eurozone account for 8.3 per cent and 6.9 per cent of Singapore’s GDP respectively, according to a November 2022 parliamentary response from Trade and Industry Minister Gan Kim Yong.
“The projected recession in the US and most of Europe … will definitely send ripples through the ASEAN export supply chain. Singapore will likely feel the impact of the slowdown in global trade,” said ING’s senior economist Nicholas Mapa in a recent report.
Already, exports are slowing.
Singapore’s key non-oil domestic exports (NODX) rose by just 3 per cent last year, down sharply from 12.1 per cent in 2021, on the back of a 14.1 per cent decline in the fourth quarter.
Enterprise Singapore, in a press release on Monday, reiterated its forecast range for NODX to be -2 per cent to 0 per cent this year.
3. EASING SEMICONDUCTOR DEMAND
After a pandemic-fuelled boom, the global semiconductor industry is now in the midst of a downturn as demand – especially for consumer electronics – wears off amid global economic uncertainties.
Simmering tensions between the US and China also remain a complication, with the former announcing new export curbs last October to cut off China’s access to high-end chips and chip-making equipment made with US technology.
These curbs, while not targeted at Singapore, could still hurt the country’s semiconductor industry given how supply chains are highly complex and globalised, said Minister of State for Trade and Industry Alvin Tan in a parliamentary reply last year.
The woes of the semiconductor industry have already taken a toll on the overall manufacturing sector, which shrank by 2.6 per cent year-on-year in the fourth quarter of 2022.
This marked the sector’s first contraction since 2020, and economists expect the soft patch to persist.
“The current semiconductor bout of weakness may last until the second half of 2023 and prove a deadweight on electronics and manufacturing growth prospects at this juncture,” said OCBC Bank’s chief economist Selena Ling.