Singapore, Indonesia slip in export competitiveness
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SINGAPORE - Singapore is losing export competitiveness in the region because of rising costs, according to Credit Suisse economists.
Their research also found that the country’s small, trade-dependent economy was losing market share in the global goods trade, which meant export growth would likely remain weak in the coming years.
Vietnam, the Philippines and China are winning the export race in Asia, according to the report by Santitarn Sathirathai, Credit Suisse head of Southeast Asia and India economics and strategy, economist Michael Wan, and Ray Farris, its head of Asia macro-strategy.
The top three exporters have been gaining market share thanks to improving competitiveness and the right product mix.
Meanwhile, Indonesia, Taiwan and Singapore have underperformed in global trade in recent years, driven by erosion of their export competitiveness.
Economies in the “middle” include India, Thailand, Malaysia and South Korea.
In Singapore, “wages have continued to rise in spite of low productivity growth, depressing corporate profits and pushing up unit labour costs, driven in part by the foreign-labour curbs imposed since 2010”, the report said.
As a result, investment growth has slowed and various surveys have indicated that businesses in Singapore intend to invest less.
“All these bode ill for the prospect of goods exports moving forward,” the report said.
While Singapore’s export growth has underperformed the pace of global trade, Vietnam’s year-on-year export growth has outpaced global trade growth by 12-14 per cent on average since 2000.
There are also initial signs that the weakness in exports has spilled over beyond the goods sector into services.
The report said Singapore stood out because its deteriorating competitiveness comes alongside flagging economic growth, negative inflation and an extreme dependence on exports.
This mix is likely to prompt Singapore’s central bank to ease monetary policy at its next meeting in October, the report’s authors|said.
Separately, a report released last Friday by ANZ Research noted that exports across Asia – with the exception of Vietnam – had been shrinking for two years amid weak demand. But with governments in the region pumping money into stimulating their economies, trade in Asia is becoming increasingly import-driven.
As domestic demand recovers, import growth should start gaining traction next year even though exports might still be lacklustre, the report said.
However, this might not turn out to be the case in Singapore, which was once again highlighted as a laggard. Domestic demand is expected to remain weak on the back of poor consumer confidence.
“The slump in consumer confidence suggests consumers will remain cautious, especially with the risk of external weakness spilling into domestic activity,” the report’s authors predicted.
At the other end of the spectrum, the Philippines and Vietnam have reported the most resilient domestic demand among their fellow Asian economies.
