SINGAPORE - Non-oil domestic exports (Nodx) shrank by 13.1 per cent in 2023 amid weak demand worldwide for electronics and petrochemicals – two of Singapore’s key exports.

But there should be some improvement in 2024. In its Feb 15 Review of 2023 Trade Performance report, Enterprise Singapore (EnterpriseSG) upgraded its full-year 2024 forecast for Nodx to 4 per cent to 6 per cent growth, up from an earlier estimate of 2 per cent to 4 per cent. The upgrade is premised on projections of a gradual recovery in global electronics demand.

The contraction in 2023’s Nodx – downgraded three times by EnterpriseSG in 2023 – was larger than the latest estimate of a 12 per cent to 12.5 per cent contraction, announced in November 2023.

The forecast for 2023 Nodx was earlier cut in August, and before that in May.

Nodx grew 3 per cent in 2022.

EnterpriseSG attributed the contraction in Nodx to a drop in shipments of specialised machinery and food manufacturing.

Nodx for electronics shrank by 19.7 per cent in 2023, after the 0.5 per cent increase in 2022. Meanwhile, non-electronics Nodx declined by 11.1 per cent in 2023, following the 3.8 per cent rise in the year before.

The largest contributors to the decline in electronics Nodx were integrated circuits, which fell by 26.9 per cent, followed by a 28.5 per cent drop in personal computers and a 21.1 per cent slide in disk media products.

Petrochemicals Nodx fell by 20.1 per cent.

Total merchandise trade – which includes both oil and non-oil exports and imports – dropped by 11.7 per cent in 2023, versus the agency’s final projection of a 10 per cent decline, and a 17.7 per cent expansion in 2022.

Total merchandise trade reached $1.2 trillion in 2023, down from $1.4 trillion in 2022. Total exports fell by 10.1 per cent, while imports were down 13.4 per cent in 2023.

The decrease in total merchandise trade was driven by both oil and non-oil trade. Oil trade contracted by 16.3 per cent amid lower oil prices than a year ago, after the 47.5 per cent expansion in 2022. Non-oil trade slipped by 10.5 per cent in 2023, after the 11.9 per cent jump in 2022.

Singapore’s Nodx to all of its top 10 markets – that together accounted for 80.3 per cent of shipments – declined in 2023, except for the United States. The biggest contributors to the decline in Nodx were Taiwan, Malaysia and Indonesia.

EnterpriseSG kept its 2024 growth projection for total merchandise trade unchanged at 4 per cent to 6 per cent.

It said forecasts of resilient global economic growth in 2024 by global organisations such as the International Monetary Fund (IMF) will also help Singapore exports.

The IMF expects global economic activity to grow by 3.1 per cent in 2024, up from a previous estimate of 2.9 per cent.

Among the Republic’s key trade partners, China, the US and the Asean-5 – Indonesia, Malaysia, the Philippines, Singapore and Thailand – are expected to see growth pick up, according to IMF.

Meanwhile, the World Trade Organisation expects global merchandise trade to grow 3.3 per cent in 2024, after a 0.8 per cent expansion in 2023.

Private economists also believe that Singapore’s export performance will improve in 2024 as demand for electronics in general and semiconductors in particular is likely to rebound after a five-quarter-long global downturn.

Ms Selena Ling, chief economist and head of global markets research and strategy at OCBC Bank, said the IMF upgrade of economic growth illustrates that a global recession, which had been a major risk in the past couple of years, is unlikely to unfold in 2024.

Hence, Singapore’s export-driven manufacturing sector is likely to stage a recovery, driving Nodx up by the forecast 4 per cent to 6 per cent, she said.

“A gradual improvement in the manufacturing and trade-related sectors is anticipated with the turnaround in global electronics demand, which should benefit both the electronics and precision engineering clusters, as well as the machinery, equipment and supplies segment of the wholesale trade sector,” she said.

Mr Barnabas Gan, acting group chief economist at RHB Group, said global semiconductor sales have recovered strongly into 2024, while electrical and electronics exports in key Asian economies are also mostly up. That bodes well for Singapore, where electronics accounts for 40 per cent of the industrial production basket, and 22.3 per cent of total Nodx, he said.

However, attacks by the Houthi movement on traffic in the Red Sea – a critical link in the global supply chain – could impact shipping costs and order delays in the near term.

Inflation – the rate of gains in prices – has eased globally, but goods remain more expensive than they were in 2019. Hence, world demand may remain a bit depressed.

For instance, exports from South Korea, a global electronics powerhouse, fell by 1 per cent in January after rebounding a month earlier.

Full-year 2024 exports are still expected to rise by 7.9 per cent, according to the Korea International Trade Association.