Chart of the Day: Lukewarm foreign demand bombards Singapore’s trade-heavy economy

Firms are fighting an uphill restructuring climb.

Foreign demand has been the cornerstone of the city-state’s trade-oriented economy, and when it goes down, the economy more or less goes down with it.

According to analysts from Nomura, net exports account for 20-30% of real GDP, and Singapore’s companies are having a hard time to completely decouple given the lackluster foreign demand.

“This is also borne by our empirical analysis which shows that the global cycle exerts a lot of influence on the ability of firms to adapt to the restructuring drive. This in turn probably limited the extent to which firms could raise prices to restore their profit margins,” Nomura said.

“Core inflation has lagged unit labour cost growth in recent years, as opposed to the pre-crisis period when core inflation tended to exceed unit labour cost growth,” Nomura added.