Singapore Exports Fall at Record Pace

Singapore's non-oil exports slumped in January at a record pace from a year earlier, piling pressure on the central bank to let the currency fall to help manufacturers cope with recession in major markets.

CNBC.com

Non-oil exports plunged 34.8 percent from a year earlier, deeper than market expectations for a drop of 32.7 percent and echoing record falls in January exports from South Korea and Taiwan as a deteriorating global economy hits demand for Asian goods.

Singapore's non-oil exports fell 3.2 percent from December on a seasonally adjusted basis to S$10 billion ($6.60 billion), trade promotion agency International Enterprise Singapore said in a statement on Tuesday.

After the data, the Singapore dollar dropped to 1.5282 per U.S. dollar, the lowest rate since Dec 8.

The central bank, the Monetary Authority of Singapore (MAS), said last month its monetary policy stance was appropriate and it had no plans to review policy before its next scheduled meeting in April.

However, analysts said the pace of the economic decline would prompt the authority to loosen its control on the Singapore dollar, its main monetary policy tool, sooner.

"Clearly the under-belly of the open, trade-dependent model is exposed and begs of more policy action," said Vishnu Varathan, economist at Forecast.

"MAS, in our opinion, still has room to loosen FX policy and will be inclined to undertake any such moves ahead of the scheduled meeting in April."

Singapore's government says the island is suffering its worst ever recession after recording three consecutive quarters of economic contraction.

The economy depends heavily on trade, and non-oil domestic exports were worth about 70 percent of gross domestic product in 2008.

The January fall in exports from a year earlier was the biggest since records began in 1977, the trade agency said.

Shipments to the United States and China both fell around 50 percent from a year ago, while exports to the European Union fell 13 percent.

The United States, Japan and the euro zone, the biggest economies in the world, are all mired in recession.

Singapore's electronics exports fell 38.4 percent while pharmaceuticals dropped 4.5 percent.

"This was the 9th straight month of year-on-year decline as well as the worst contraction month on record," said Alvin Liew, economist at Standard Chartered. "Any export recovery will only come in the last few months of 2009, in an optimistic scenario."

Singapore's economy contracted at a seasonally adjusted, annualised pace of 16.9 percent in the October-December quarter, its worst ever quarterly drop, and the government believes gross domestic product could decline by as much as 5 percent this year.

The MAS manages the Singapore dollar against a secret trade-weighted band of currencies, and analysts expect it to push down the band, effectively devaluing it.

"You can expect the central bank to recenter the Singapore dollar band to aid exports," said Song Seng Wun, economist at CIMB.

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