Singapore Manufacturers Experience Weakened Conditions

To say that things have slowed down in Singapore’s economy is understating the real situation.  Economic analysts have already cut down the 2016 growth forecast to 1.6% amidst the backdrop of stagnant growth in Q1 2016. The Monetary Authority of Singapore (MAS) has decried this as the weakest annual growth since recovery started in 2009. One of the most affected sectors according to economic analyst is the local manufacturing with no signs of recovery being seen in the horizon.

According to BMI Research, the main market for local products, which is China, has been undergoing an economic meltdown since the near collapse of its stock market. China has over the last few years started surpassing the U.S and EU as the main market for local manufacturers and the effects of weakening demand are being felt in the country.

“China is starting to surpass the U.S and EU as the single most important market for non-oil domestic exports (NODX) from Singapore,” the report by BMI Research says. With sliding demand in China, manufacturers are expected to feel the pinch before the markets in Asia fully recover.

In January 2016, a net weighed balance of 22% of local firms indicated they expected a tough market situation in Q1 2016 between January and June 2016 compared to Q4 2015.

The report by Economic Development Board (EDB) shows that Singapore manufacturers by May 2016 have not experienced any respite though there is a slight upturn in the rest of Asian markets. This has necessitated BMI Research to revise its forecast for exports downwards by -1.4% for 2016.

According to EDB, the weak outlook in the country’s manufacturing export market is broad based from general manufacturing, precision engineering and chemical engineering. The exception is in the biomedical sector where most firms have a positive outlook for the later quarters of 2016.

There are also concerns that coupled with the weak external demand is the rising business costs in the country against a backdrop of sustained wage growth. This has forced some manufacturers to forego invaluable talent in the market as they await stabilization of demand.

“The combination of export demand deflation against the trend of buoyant wages is eroding profit margins for exporters and this has hampered expansion”, says the report.

With the sluggish economy still a concern to most manufacturers, there is hope that the expected rebound in the Chinese economic momentum will turn things around in Q4 2016 albeit marginally.

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