SINGAPORE (Reuters) - Singapore’s non-oil domestic exports (NODX) in August fell more than expected, raising the prospect of the city-state entering into a recession as exports to the European Union plunged.
The trade-dependent Southeast Asian city-state said on Monday non-oil domestic exports (NODX) fell 10.6 percent from a year earlier, hurt by a 10.4 percent drop in electronics and a 28.7 percent plummet in shipments to the EU, its largest market.
On a seasonally adjusted month-on-month basis, NODX shrank 9.1 percent after contracting 3.6 percent in July.
Electronics exports contracted 14.8 percent in August from July after seasonal adjustments, while non-electronics NODX shrank 7.1 percent, trade agency International Enterprises Singapore said in a separate email.
“Although our baseline case is not for a quarter-on-quarter contraction, the chances are not minute. There is perhaps a 40:60 chance of contraction,” said Oversea-Chinese Banking Corp head of treasury research Selena Ling, whose estimate was the closest among the 13 economists polled by Reuters.
The median estimate in a Reuters poll had been for non-oil domestic exports to fall 4.0 percent year-on-year and 1.8 percent month-on-month.
Singapore’s economy shrank less than anticipated in the second quarter, thanks to a surge in pharmaceutical production in June, gross domestic product (GDP) data showed last month.
But the government warned of continued uncertainties and downside risks and narrowed its 2012 growth forecast to 1.5 to 2.5 percent from an earlier 1-3 percent.
Economists expect the Southeast Asian city-state’s gross domestic product to grow 2.4 percent this year, down from a median estimate of 3.0 percent three months earlier, the central bank’s latest quarterly Survey of Professional Forecasters showed.
Singapore’s weaker-than-expected trade data follows signs of a slowdown elsewhere in the region, with a survey on Monday showing New Zealand’s services sector slowed for a third consecutive month in August to a two-year low. South Korea said on Monday retail sales fell for a third straight month in August.
Looking ahead, economists said the weak August trade data reinforced the widely held perception that the Monetary Authority of Singapore (MAS), the country’s central bank, will likely ease monetary policy slightly in October by slowing the local dollar’s rate of appreciation.
“With these kinds of numbers, growth momentum appearing to slow down and inflation less of an issue, MAS could look at a gentler slope of appreciation,” said CIMB regional economist Song Seng Wun.
Singapore sets monetary policy by allowing its dollar to rise or fall against a undisclosed basket of currencies. When it issued its last policy statement in April, MAS said it would allow a modest and gradual rise of the Singapore dollar with a slightly sleeper slope of appreciation.
OCBC’s Ling warned, however, that MAS along with its regional peers would be cautious about easing policy too rapidly given the risk of asset appreciation fuelled by the U.S. Federal Reserve’s latest round of quantitative easing.
“Asian central banks are worried about the QE side of things and what it may do to asset inflation,” she said.
Reporting by Kevin Lim; Additional reporting by Charmian Kok; Editing by Jacqueline Wong