Recession haunts Singapore as exports crash to three-year low

Policy easing won't help much either.

Singapore's non-oil domestic exports (NODX) is expected to remain weak throughout the first half of 2016, after shipments crashed to a three-year low in March.

UOB analysts note that the NODX figure is expected to contract by 3.3% year-on-year in the first six months of the year. UOB added that adopting a neutral monetary policy stance may not go too far in supporting Singapore's NODX.

“One of the key reasons is that Singapore imports most of the materials used for domestic production. The Ministry of Trade and Industry had earlier said that the imported content of Singapore’s exports amount to 60%. This means that every $1 exports from Singapore contains 60 cents worth of imported content. As such, a weaker SGD will mean that the imports of materials will be more expensive and the higher cost will still be passed on to overseas buyers eventually,” UOB said.

Meanwhile, Citi noted that it now expects the city-state to enter mild recession as external headwinds escalate.

“We expect official forecasts to be shaved to 1-2% in Aug after the 1H16 data is released. But should GDP see an unexpectedly sharp step-down in the next two quarters, which results in an even sharper official GDP downgrade in Aug (0.5-1.5% or lower), odds may tilt in favour of a downward re-centring come Oct 2016,” Citi said.