Singapore’s exports skidded in June as shipments to China and Europe continued to contract, suggesting the trade-reliant economy may need more stimulus to support a fragile recovery in the face of weak global demand and concerns over Brexit.
The affluent city-state’s economy grew slower-than-expected in the second quarter as underlying weakness in its key financial services industry added to the pressure on output from a depressed manufacturing sector.
Non-oil domestic exports (NODX) fell 2.3 percent last month from a year earlier, the trade agency International Enterprise Singapore said in a statement on Monday.
That was slightly better than the median forecast of a 3.0 percent fall in a Reuters poll, but partially unwound an unexpected rise in May on gold and pharmaceuticals shipments.
Some economists say the government may need to boost fiscal stimulus in the event of more pressure on the economy.
“With MAS’ policy complicated by the strength in the S$NEER, there is still space for subsequent off-budget fiscal measures should the economic outlook deteriorate further,” said Weiwen Ng, an economist for ANZ in Singapore.
The Monetary Authority of Singapore manages policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners based on its nominal effective exchange rate (NEER).
In April, the central bank eased policy by setting the rate of appreciation of the policy band at zero percent. But the Singapore dollar has remained strong on demand for safe-haven in emerging Asia, putting further pressure on both exports and inflation.
CHINA, EUROPE HIT
Exports to China, Singapore’s top overseas market, fell 9.9 percent in June from a year earlier, compared to a 10.1 percent decline in May.
“With China’s deceleration being a structural one, the lackluster NODX performance could last for a while,” said Irvin Seah, senior economist for DBS Bank.
China’s economy in April-June period expanded slightly faster but worries persist about the outlook in the world’s second-largest economy.
Sales to the European Union slumped 5.8 percent in June on-year after a 14.0 percent contraction in May, and there are worries Brexit could further impact sales.
The International Monetary Fund earlier this month cut its euro zone growth outlook for the next two years and warned that the conditions could worsen if Britain’s decision to leave the EU continues to spread turmoil in financial markets. The EU is Singapore’s second-largest NODX market.
Shipments to the United States rose 5.9 percent last month from a year earlier, but that was slower than the 9.1 percent growth seen in May.