Singapore’s Advance GDP Growth Reading Will Likely be Revised Lower

Following the March’s weak non oil domestic exports (NODX), Singapore’s industrial production index (IPI) also slowed to 5.9% yoy during the month (6.7% yoy in February). The slowdown was due to lower production of electronic goods, where output of semiconductor products trended lower from 27.4% yoy in February to 18.8% in March, while output of data storage, infocomms & consumer electronics as well as other electronic modules of components contracted further in March. However, the slowdown in output of electronic goods was offset by higher production of chemicals and precision engineering segments, which rose by 8.2% and 10.5% yoy respectively.

Excluding biomedical manufacturing, the country’s IPI slowed from 9.7% yoy in February to 8.6% in March, indicating some slowdown in the manufacturing secor. The slower March’s IPI will likely point to a weaker reading for the revised GDP growth in 1Q18, where the advance reading released two weeks ago showed the country’s real GDP growth expanding by 4.3% yoy.

Nevertheless, Singapore Government is taking a cautious stance on the economic outlook. Monetary Authority of Singapore (MAS), in its latest macroeconomic review, projected that Singapore’s GDP growth will likely only come in at slightly above the mid-point of the 1.5 – 3.5% forecast range in 2018, after the better-than-expected performance in 2017.

Separately, Thailand’s exports slowed in March, slowing from 10.3% yoy in February to 7.1% in March, but better than market expectations of 6%. The slowdown was attributed to lower exports of principle manufacturing products, which has the largest share in total exports, slowing by 7.7% yoy in March (11.5% in February). Similarly, exports of agricultural goods also trended lower during the month, contracted for the first time in seventeen months, falling by 9.7% yoy in March, after expanding to 0.4% yoy in February. In contrast, exports of agro industrial products, as well as mineral products and fuels increased by 5.6% and 49.8% respectively.

Meanwhile, the country’s gross imports also slowed to 9.5% yoy in March (16% in February), and below market expectations of 11.6%. The slowdown was reflected across the board due to high base effect from last year. For 1Q18, the cumulative trade surplus amounted to US$2bn, with export rising by 11.6% yoy and import grew by 16.6% yoy during the quarter.

As a result, we believe the contribution of net exports to Thailand’s GDP growth is likely to be higher for the quarter, providing some support for the possible slowdown in domestic demand. For the full year target, the government projected the export growth to moderate by 8% yoy (9.9% in 2017), possibly due to higher base in 2017, the appreciation of Thai baht performance as well as slower demand from the advanced economies for electronics related products.

Source: Affin Hwang Research - 27 Apr 2018