singapore exports face both shrinking volumes and currency competition 1079362015
But underlying demand worries outweigh currency issues
Data from Bloomberg shows that regional currencies around Singapore have declined between 7.6 per cent and 16.2 per cent this year against the US dollar, and from 1.7 per cent to 10.9 per cent against the Singapore dollar. The worst performers have been the New Zealand dollar and the Malaysian ringgit.
The trend is ominous for Singapore’s exporters, already facing shrinking volumes due to a sluggish global economy. The depreciation in regional currencies makes imports from Singapore more expensive, denting their price competitiveness. Conversely, those countries are able to price their exports to Singapore, and other destinations, lower, affecting the market for Singapore-produced goods.
"Malaysian products have become more competitive in the export market," said Mr Jimmy Soh, deputy president of the Singapore Food Manufacturers' Association, as quoted by the Straits Times.
One sector that will be particularly hard hit will be Singapore’s refined petroleum oil exports to Malaysia and Indonesia, which will become more expensive in those countries.
Other non-electronic domestic exports out of Singapore fell 2.1 per cent in July, led by exports of structures of ships and boats, which plummeted 98.3 per cent, exports of printed matter which sank 51.8 per cent and those of primary chemicals, which fell 22.1 per cent.
The data shows underlying weakness that is unlikely to be remedied by currency variations.
"There's an absence of a strong final force of demand, be it the Chinese industrial economy or US households. In that environment, exports are likely to remain weak," said ANZ's chief economist for South Asia, ASEAN and Pacific, Mr Glenn Maguire, who anticipates that Singapore’s exports would remain at last year's levels at best, according to a report in Asia One.
His views are echoed by OCBC economist Selena Ling who said in the Straits Times, "Demand is not there. Every month, the story is the same – exports to seven or eight of our top 10 markets shrink."
Slowing exports have implications for Singapore’s economic growth. The Ministry of Trade and Industry recently trimmed its forecast for the current year to between 2 per cent and 2.5 per cent this year, down from a previous estimate of 2 per cent to 4 per cent.
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