Singapore’s economic performance is an important indicator of global trade directions, and the city-state’s growth decline may be a cause for worry, said Peter Hall, chief economist of Canada’s import-export bank, Export Development Canada (EDC).
“An important nexus in a hot trading zone, Singapore—where international trade is an astonishing 300 percent of GDP—often yields early clues about the near-term direction of global trade,” said Hall in his weekly column on the EDC website.
Despite robust gains in domestic demands, Singapore’s overall GDP has faltered. “The strong momentum that built in the first quarter came to a sudden halt in the April-June period,” he said. “Year-on-year growth fell from a steady double-digit clip to just 0.8 percent in the second quarter, tracing a similar movement in industrial production. So far, data seems to be corroborating the slowing global trend.”
Singapore’s trade numbers are even less encouraging, Hall said. Its non-oil export growth has been down since October 2010, and momentum going into the third quarter is quite weak. “Trade is being weighed down by flows to the EU and US, but intra-regional exports—notably to Hong Kong and Malaysia—have also softened.”
Still, Hall acknowledged that other countries in the region have not shared Singapore’s experience: Export growth in Indonesia, Malaysia and Vietnam, in particular, has been robust.
“These flows suggest that poor trade numbers are temporary, related more to supply-side disruptions [following the earthquake that hit Japan] than a more serious weakening of demand,” he said. “Rebounding Japanese production and nascent increases in Taiwanese exports of electronic products hint at a resumption of growth.”
If Japan’s recovery continues, the global economic outlook will be more positive over the coming months, Hall predicted. “Barring any further political or economic disruptions, it is very likely that momentum will rise toward year-end. But the balance between growth and decline could hardly be more delicate.”
“The bottom line? If momentum in global trade is to rise, the clues will likely surface first in Singapore,” said Hall.
Photo by OzMark17
