Thailand’s Export Growth Contracts for the Third Consecutive Month

Singapore’s headline inflation improved to 0.4% yoy in January from 0.5% in December, due to lower cost of housing and utilities, which fell by 0.5% yoy from +0.1% in December, its first decline since October 2018. Factors for the decline in cost of housing and utilities, which accounts for 26.3% of the total weight of the CPI basket, were due to the downward revision in electricity tariffs by an average of 1.2% from January 1 to March 31st 2019, as well as the downward impact of the phased nationwide launch of the Open Electricity Market (OEM) on electricity prices. Similarly, costs of transport and communication fell by 1.8% yoy and 2.9%, respectively in January. Coreinflation, which excludes the costs of accommodation and private road transport, eased to 1.7% yoy in January from 1.9% in December, due partly to the slower rise in costs of electricity and gas.

Going forward, with the fall in global oil prices in recent months, as well as greater market competition in several consumer segments such as telecommunications, electricity and retail, both Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) revised its headline inflation projection downwards to 0.5-1.5% for 2019 from 1-2% previously (0.4% in 2018). Meanwhile, the core-inflation forecast is unchanged at 1.5-2.5%. As for GDP, MAS is projecting real GDP growth to be close to the mid-point of the 1.5% to 3.5% for 2019. As such, with the government measures announced in the recent 2019 Budget to support the economy, we believe MAS will likely maintain its monetary policy, with no change to the current settings for the trade-weighted exchange rate.

Singapore’s industrial production index (IPI) fell from 3.1% yoy in December 1.7% in January, its first contraction since December 2017. Excluding biomedical manufacturing, industrial production had also declined for the second consecutive month by 5.9% yoy in January (-3% in December). The decline in IPI was due to the fall in electronics and precision engineering clusters, which contracted by 13.7% and 15.7%, respectively. According to MTI, it expects Singapore’s manufacturing sector to slow further in 2019 following expansions of 10.4% in 2017 and 7.2% in 2018, where the electronics and precision engineering clusters are expected to be hindered by slower global demand for semiconductors and semiconductor equipment.

Separately, Thailand’s export growth continued to decline for the third consecutive month by 5.6% yoy in January from -1.7% in December, its sharpest decline since July 2016. Imports registered a double-digit growth of 14% yoy in January from -8.1% in December. As a result, the trade balance fell to a deficit of US$4bn in January, following its surplus of US$1.1bn in December, its widest deficit since April 2013. The Commerce Ministry guided that the possibility of the Thai Baht strengthening further against the US Dollar, especially if the upcoming elections goes smoothly, may prevent National Economic and Social Development Board (NESDB) from reaching its export growth target of at least 5% in 2019.

Source: Affin Hwang Research - 1 Mar 2019