EXPORTS plummeted last month in a performance that startled several economists and raised concerns about the economy's growth prospects.
Non-oil domestic shipments plunged 9.7 per cent in February over the same month last year - the biggest fall in two years. Last month's poor showing was due in part to distortions from the timing of Chinese New Year, which fell in February this year and in January last year.
Even after taking this into account, economists had expected last month's non-oil domestic exports to fall by only 0.9 per cent. They say the disappointing data is a sign that Singapore's first-quarter growth will be weak amid the still-lacklustre global economy and ongoing domestic restructuring.
The statistics are also fuelling expectations that the central bank might further slow the appreciation of the Singapore dollar at its scheduled policy meeting next month.
Shipments of both electronics and non-electronics exports declined last month compared with February last year, according to figures from trade agency IE Singapore yesterday. Non-electronics exports, which account for about 70 per cent of shipments, were dragged down mainly by a 30.9 per cent plunge in the petrochemicals segment due in part to lower oil prices.
Exports to China, Japan and Taiwan fell most sharply compared with February last year - likely due in part to the Chinese New Year holidays, said HSBC economist Joseph Incalcaterra.
However, last month's data also shows the impact China can have on Singapore's trade numbers, and "slowing activity in China also explains a significant part of the contraction", he added.
The downbeat trade data, combined with weakness in other indicators like manufacturing output, points to a slow first quarter, said Bank of America Merrill Lynch economist Chua Hak Bin, who referred to the latest export numbers as "ugly".
He thinks the Government will likely cut its growth forecast to between 1 and 3 per cent for the year, down from the current estimate of 2 to 4 per cent. The weaker growth prospects and lower inflation risks suggest that the Monetary Authority of Singapore (MAS) will ease monetary policy further next month, he added.
The MAS uses the exchange rate as its main tool to strike a balance between controlling inflation from overseas and laying the foundations for economic growth.
In a surprise move in January, MAS eased the rise of the Singapore dollar - making exporters' goods relatively less expensive for overseas markets.
Credit Suisse economist Michael Wan, who said the latest export numbers were "dreadful", added that the broader macroeconomic backdrop "points to a much weaker Singdollar over the next few months".
Citi economist Kit Wei Zheng noted that while it is looking increasingly likely that the MAS might allow the currency to weaken further, the extent of the policy shift will depend on how the economy performs over the January to March period.
This article was first published on March 18, 2015.
Get a copy of The Straits Times or go to straitstimes.com for more stories.