2. The better performance was underpinned by the rebound of global electronics demand and the bottoming out of the crisis-ridden economies in Asia.

3. Non-oil domestic exports (NODX), which fell by 2.8 per cent in 2H 1998, grew by 3.5 per cent in 1H 1999. This was due to the robust 10.3 per cent growth in the second quarter (2Q), which offset the 3.2 per cent decline in the preceding quarter. Both product and market factors accounted for the improved performance.

4. Electronics. Domestic exports of electronics (69 per cent of NODX) increased marginally by 0.3 per cent in 1H 1999, after declining by 3.7 p-er cent in 2H 1998. Of the top five electronic exports, Printed Circuit Boards, Assembled (PCBAs), integrated circuits and personal computers recorded increases in 1H 1999, reversing contractions in 2H 1998. However, disk drives, Singapore’s top export, remained in the doldrums. Domestic exports of disk drives fell 5.2 per cent in 1H 1999, reflecting weak prices due to keen competition among major disk drives manufacturers.

5. Non-Electronics. Domestic exports of non-electronics (31 per cent of NODX) rose by a robust 10.6 per cent in 1H 1999 after a marginal decline of 0.7 per cent in 2H 1998. In particular, there was exceptionally strong growth in domestic exports of pharmaceutical products (2.1 per cent of NODX) and disc media products (2.0 per cent of NODX) to EU and Japan respectively.

6. Of the top 5 markets for NODX, two are outside Asia, viz US and EU which account for 29.7 per cent and 21.3 per cent of NODX respectively. The remaining three markets viz Malaysia, Japan and Hong Kong account for 11.5 per cent, 6.9 per cent and 5.8 per cent of NODX respectively.

7. US. It grew by 2.3 per cent in 2Q 1999, after declining by 6.8 per cent in first quarter (1Q) 1999, resulting in a net contraction of 2.1 per cent in 1H 1999. The 2Q expansion was the first after three consecutive quarters of decline. Electronic exports grew marginally by 0.4 per cent in 2Q 1999, after contracting by 8.2 per cent in 1Q 1999. Non-electronic exports surged by 15.4 per cent (due mainly to the 58.1 per cent growth in pharmaceuticals), after a modest 2.2 per cent growth in 1Q 1999.

8. EU. It grew by 8.2 per cent in 1H 1999. This was due to the robust 10.2 per cent expansion in 2Q 1999 after a 6.4 per cent growth in 1Q 1999. The 2Q 1999 expansion of exports to EU was the tenth consecutive quarter of positive growth.

9. Japan. It grew by a hefty 17.8 in 1H 1999. This resulted from the robust 39 per cent growth in 2Q 1999, reversing 4 consecutive quarters of decline. The key contributory factor was the strong growth in non-electronic exports (mostly disc media products) in 2Q 1999.

10. Hong Kong. It fell by 18.0 per cent in 1H 1999, the worst performance of the top 5 markets. Also, Hong Kong was the only top 5 markets which continued to decline in both first and second quarters of 1999. However, the decline was less severe in the second quarter, as the deterioration of economic conditions in Hong Kong stabilised. (The analysis of the performance of NODX to Malaysia is covered in paragraph 13 to 15).

11. Non-oil re-exports (NORX) shrank by 8.5 per cent in 1H 1999, following a 7.1 per cent contraction in 2H 1998. This reflected the severe decline of 15.6 per cent in 1Q 1999 which moderated to a 1.1 per cent contraction in 2Q 1999. All the key markets for NORX did better in 2Q 1999 as compared to 1Q 1999.

12. Though NORX to US and EU shrank in 1H 1999, the decline was significantly less severe in 2Q 1999 as compared to 1Q 1999. The US, for example, fell marginally by 0.2 per cent in 2Q 1999, after contracting by 22.7 per cent in 1Q 1999. NORX to key Asian markets such as Malaysia and Japan, chalked up positive growth in 1H 1999 after contracting in 2H 1998.

(i) NODX

13. NODX to the 3 regional economies registered double-digit growth rates in 2Q 1999. However, because of the severe contractions in 1Q 1999, overall growth in 1H 1999 was mildly positive for Malaysia (2.7 per cent) and Thailand (2.4 per cent), while Philippines registered a marginal decline (-1.1 per cent).

 14. The turnaround in NODX to the 3 economies in 2Q 1999 was due to two key factors. First, exports of consumer¹ goods (directly dependent on demand in these countries) to these 3 markets expanded in 2Q 1999 after experiencing double-digit contraction in 1Q 1999, fuelled mainly by increased consumer demand as a result of the bottoming out of these economies. Second, exports of intermediate goods² (mostly used to manufacture products where the final demand is in developed markets, eg US) also expanded in 2Q 1999, with the rebound of global electronics demand. About 83 per cent of NODX to the 3 regional economies are intermediate goods.

 (ii) NORX

15. NORX to the 3 regional economies registered strong growth in 1H 1999. All 3 markets expanded by double-digit growth rates in 2Q 1999, which were also significantly higher than the expansion in the preceding quarter.

(a) The 2Q 1999 export performance, which was significantly better than earlier anticipated, suggests that the $10.5 bn cost-cutting package had been effective in restoring cost-competitiveness. The cost-cutting measures are likely to have an even bigger impact in 2H 1999.

(b) The key developed markets, in particular US and EU which absorb about 50 per cent of NODX, are expected to remain healthy. However, the US economy is expected to moderate in 2H 1999.

(c) Non-oil exports to the 3 regional economies viz Malaysia, Thailand and Philippines are expected to perform better in 2H 1999, in line with the improved economic outlook in these markets. These markets account for 17 per cent of NODX and 27 per cent of NORX.

(d) The rebound in global electronics demand is expected to continue into the second half of 1999, based on various demand indicators (eg US manufacturers' new orders of electronic components) and forecasts by research institutions. This upturn is expected to benefit exports to final markets such as US, and to the region (to support manufacturing operations for subsequent exports to the final markets eg US).

(e) Domestic exports of non-electronics is expected to be boosted by chemical plants coming on-stream in 2H 1999. Chemical exports account for 7.7 per cent of NODX.

(f) Non-oil retained imports of intermediate goods, a short-term indicator for manufacturing activities, had been in the positive territory since March 1999. This suggests continued growth in manufacturing activities in the months ahead.

 17. Nevertheless, there are major uncertainties which could derail the recovery process:-

 (a) Although the US economy is widely expected to continue expanding in 2H 1999, stress points still exist. For example, a sharp correction of the US stock market, albeit unlikely, would adversely affect consumer spending, which accounts for 68 per cent of the country’s GDP.

(b) While economic conditions in key Asian markets have improved, the recovery process is far from complete. The major challenge facing these economies is to continue with banking and corporate reforms (which still has some way to go), needed to sustain recovery.

(c) Prices of key electronic products such as disk drives and integrated circuits are likely to remain under pressure, due to intense competition in the industry.

18. The overall assessment is that while total trade growth is likely to be positive for 1999,

it is still early to conclude that recovery would be complete and sustainable. Even if growth for 1999 reaches 6 per cent (the upper end of the projected range), our total trade would still be below the pre-crisis level in 1997, as there was a 7.5 per cent contraction in 1998.

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1 Examples of consumer goods would be TVs, radios and VCRs.

2 Examples of intermediate goods would be integrated circuits, PCBAs and parts of TVs

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For press enquiries, please contact:

Chong Siew Hong (Ms), Senior Trade Officer/Corporate Communications Division

Tel: 433 4942/ Fax: 337 8136

Editors kindly note:

Detailed trade statistics for June1999 are available on the Internet via Statlink

Service at location: https://www.tdb.gov.sg/gss/gss.html

Ms Agnes Lau at: E-mail: Globalink@tdb.gov.sg / Tel: 65- 433 4437/ Fax: 65- 337 5253