SINGAPORE (July 17): DBS Bank’s outlook for Singapore’s economy in 3Q and beyond is turning “increasingly cloudy” on expectations of a slowdown in GDP growth, as well as declining trade prospects in the longer-term due to the effects of trade protectionism and tighter liquidity conditions.

This follows Enterprise Singapore’s Tuesday morning announcement of Singapore’s external trade figures for June 2018, which reflected a marginal y-o-y increase of non-domestic oil exports (NODX) by 1.1% in June – in line with the bank’s expectations of a “drop back to reality” in the headline number.

“Although the economy had held up well in the second quarter, the impact from the slowdown on the external front will only manifest in the third quarter figures. Expect an even slower GDP growth in the third quarter. Coupled that with the effects of trade protectionism and tighter liquidity conditions, economic outlook in the longer horizon is turning increasingly cloudy,” comments senior economist Irvin Seah in DBS’s Asian Insights report on Tuesday.

In particular, Seah says the bigger worry is the 10.8% lower NODX when compared to the previous month on a seasonally adjusted basis.

Although Enterprise Singapore partially attributes the m-o-m decline in NODX to a pullback in non-electronics exports, he views this as a signal of an underlying downwards trend.

“The earlier strong showing despite the persistent decline in electronics (-7.8% YoY YTD) was driven largely by ad hoc items such as “civil engineering equipment” and the ever-volatile pharmaceutical products. As such, sustainability was always in question, and risk was on the downside,” says Seah. 

“Moreover, the PMIs over key markets have been easing and leading indicators for electronics were also pointing to a softer patch in global electronics demand,” he adds.