NODX moderated the decline in February – UOB

According to senior economist Alvin Liew at UOB Group, the non-oil domestic exports (NODX) in Singapore have continued to decrease, with a 15.6% year-over-year drop in February, marking five consecutive months of contraction after 22 months of growth. The value of NODX has also declined to S$13.0bn, the lowest it has been since June 2019. The sequential basis of NODX fell by 8.0% month-over-month in February, the deepest decline since September 2020. However, despite the negative outlook, Liew notes that there are positive developments taking place as well.

In January, major destinations continued to reflect weak global demand, but there was an improvement in February, as three markets (US, Japan, and Thailand) reported positive year-over-year outcomes, compared to only two in January. Notably, NODX to the US is returning to growth, standing at 8.7% in February as opposed to -31.5% in January. While demand weakness persists in China, the magnitude of decline has eased to -11.3% year-over-year, down from -41.1% in January. A similar moderation in demand weakness was observed in most of Southeast Asia, such as NODX to Malaysia, which contracted by 10.5% year-over-year in February as opposed to 23.5% year-over-year in January, and NODX to Indonesia, which declined by 2.0% year-over-year in February as opposed to 17.5% year-over-year in January.

Looking ahead, Alvin Liew believes that the broad-based weakness in both electronics and non-electronics performance will continue to weigh heavily on NODX momentum and manufacturing demand for Singapore. While there is some improvement (less negative prints on NODX declines from major export destinations of China and ASEAN), it is still early to call it the start of an uptrend. Liew warns that there may be more months of year-over-year declines in NODX for the first half of 2023 before factoring in some improvement in the second half of the year. The continued weakness in global demand due to further monetary policy tightening and concerns about economic slowdowns in developed markets will not be helpful. Additionally, the high base effect will work against the NODX in early 2023, as seen in the months of January and February. Thus, Liew expects full-year NODX to contract by 5.5% in 2023.

The NODX serves as a valuable indicator of Singapore’s performance in terms of trade and the health of its manufacturing sector. The country’s economy relies heavily on exports, with electronics and services being the main contributors to this sector. With the prolonged reduction in NODX, Singapore may face challenges in maintaining its economic growth, especially in the face of a worsening pandemic and slower external demand. Singapore may have to consider policy measures to boost its exports and promote more business-friendly regulations to attract foreign investment.


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