March’s NODX Performance in Singapore Also Unlikely to Hold Up

Thailand’s exports expanded to an eight-month high of 4.2% yoy in March from a decline of 4.5% in February. This was significantly higher than market expectations of a sharp contraction of 5.8%. Exports were supported by higher demand for principal manufacturing products and agro industrial products, which expanded by 6.4% and 4.7%, respectively. Total imports also rose by 7.3% yoy in March from -4.3% in February. As a result, the trade surplus narrowed to US$1.6bn from US$3.9bn in February. Going forward, we believe Thailand’s export performance will likely weaken in 2Q20. While some attributed the better-than-expected exports to the weak Thai Baht, which has depreciated by 8.1% against US$ year-to-date, we believe that this may not be enough to offset the weak demand from advanced economies. We expect Thailand’s exports to be dragged down by lower intra-regional trade as well as exports to China and US, from potential global supply chain disruption. In addition, we expect low global oil prices will also weigh on oilrelated exports. Bank of Thailand (BOT) has earlier projected that the country’s export growth will decline by 8.8% this year.

Singapore’s non-oil domestic exports (NODX) rose sharply by 17.6% yoy in March from 3.1% in February, its second consecutive month of positive growth partly due to the low base effect. This was its fastest rise since October 2017. The strong rise in NODX was mainly due to higher exports of non-electronics, which increased by 20.5% yoy in March (3.2% in February) amid higher demand for non-monetary gold, specialised machinery and pharmaceuticals. Exports of electronic products rose for the second straight month by 5.8% yoy from 2.5% in February. Despite the increase in the country’s NODX in 1Q20, in the months ahead, we expect export growth to be dampened by slower global economic activity amid quarantines and containment measures that will impact external demand. Meanwhile, global supply chain disruptions will also weigh on the country’s export performance.

Separately, Singapore’s headline inflation slowed for the second consecutive month to a flat growth in March from 0.3% in February, its slowest rate since January 2018. Core-inflation which excludes costs of accommodation and private transport, declined by 0.2% yoy from -0.1% in February. Lower inflation was mainly due to the decline in cost of private transport (-0.3%) and a further fall in the cost of services (-0.7%). Ministry of Trade and Industry (MTI) and Monetary Authority of Singapore (MAS) in a joint statement guided that inflation will likely remain weak in the coming quarters due to soft global demand conditions while weaker labour market conditions is expected to dampen consumer demand. MAS and MTI project both headline and core inflation to average -1% and 0% in 2020 (0.6% and 0%, respectively in 2019)

Source: Affin Hwang Research - 24 Apr 2020