That title should grab some attention! Why? In a world where most are convinced that we are straining to generate so-so ‘new normal’ growth, anything that’s ‘on the move’ is an eye-catcher. And when it’s Singapore we are talking about, it’s even more exciting. As a key regional trade center, Singapore’s stats are a critical gauge of what’s going on in the surrounding economies, and also in the broader global arena. We pointed out the budding growth in Singapore about eight months back, and recent figures seem to confirm it. What are the numbers telling us?
Let’s start with the most recent GDP number. In stark contrast to trend performance, growth leapt by 12 per cent at annual rates in the final quarter of 2016. By any standard, that’s impressive. The causes? Exports posted a decent gain, although it was swamped by a surge in imports that weakened net trade. Those imports caused inventories to swell. That helps GDP today, but usually harms it tomorrow as the inventories are worked down. Add to this a hefty contribution from government consumption, and the actual sources of growth are not that inspiring. But there’s a glimpse of underlying activity on the investment front: spending on equipment, a volatile series, was up sharply in the fourth quarter to reach its highest post-stimulus level.
Is this sustainable? A lot depends on core economic activity, essentially on two fronts. Singapore has a significant manufacturing sector that produces mainly for export. Data for industrial production has been climbing rapidly since the middle of last year, and is currently at its highest levels since 2010. Electronic products are the key driver of this growth, with semiconductors leading the charge. The chemicals sector is also doing well, as is precision engineering and medical products. In almost every case, there is a clear renewal of growth that has been absent for several years.
As expected, this is showing up in export data. The ‘big five’ electronic products are on the up and up, with integrated circuits showing the most dramatic gain. Petrochemicals and electrical machinery are also contributing solid, sustained growth. Again, it’s the departure of recent activity from long-standing flat performance that is most exciting. What is also interesting is that these domestic exports are being driven by the regional economy – China, India and Taiwan in particular – and not by increased demand in the US and EU.
EDC resources to help you export
Singapore’s second growth front is re-exports – that is, the significant amount of trade that passes through the nation-state on its way to somewhere else on the planet. This doubles the overall trade count every year, and after a shocking drop in the early-going last year, has risen smartly to levels that rival the highest points in the post-recession period.
Canada has generally fared well in the Singapore market. Exports of higher value-added goods, like aerospace products, engines, jewellery, electronic products and other equipment, have seen double-digit annual increases since the recession. More recently, exports of all goods have posted notable increases, in line with Singapore’s recent trade-boost. Canadian investment in Singapore is also significant. Measured at $3.7 billion in 2015, it has risen 83 per cent in just three years – a positive signal of things to come.
With all this good news, there is increased concern. Trade-intensive economies like Singapore’s are threatened by the rise of populism and its clear anti-globalization overtones. Add to that the significant doubt thrown at TPP and the future of regional and global trade integration, and there’s more than casual pause for thought. Our sense is that globalization’s significant gains will justify themselves, and that this moment of hesitation will prove a great moment of opportunity for those who persist.
Canada’s success in Singapore, together with the importance of this economy to Asian trade both now and in the future, are key reasons behind today’s official opening of EDC’s Singapore office, the first international location where transactions can be processed offshore.
The bottom line?
Singapore’s data points to a significant increase in activity that separates it from the long, tepid post-recession trend. As a bellwether economy, this is not just good news for Singapore, but for the region – and the world.