HSBC report cites Asian rebound and trade pacts
THE Asian economic recovery and the completion of several trade agreements will reignite Singapore’s exports over the next five years, according to an HSBC report yesterday.
But it notes that any cyclical boost to the country’s trading volumes will be limited by a loss of competitiveness associated with rising labour costs and the strengthening Singdollar.
HSBC expects exports to expand 4 per cent per year from now until 2020. This is significantly higher than the 1.1 per cent expansion last year, which followed a 0.6 per cent uptick in 2013.
HSBC predicts the global export growth rate to 2020 will be 8 per cent annually. While Singapore’s shipments will increase more slowly than the global export growth rate, the country is expected to have one of the highest trade growth rates among developed economies.
This rebound will be fuelled by strong economic activity among Singapore’s key trading partners – China, Malaysia and Indonesia. China replaced Malaysia as the top destination for Singapore’s exports last year, a position it is expected to maintain. Still, trade with Malaysia will remain important, given its geographical proximity. Vietnam will be one of Singapore’s fastest-growing export destinations and it will replace the United States as the fifth largest by 2030, the report says.
The imminent completion of the World Trade Organisation’s Trade Facilitation Agreement, the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership are expected to further boost world trade.
“While a short-term trade boost is expected from the increasingly robust US economy and cyclical upturns in Europe and Japan, the demographic trends in Asian emerging markets are likely to be the trade kicker from 2017 onwards, and Singapore is set to benefit,” said Mr Joe Arena, HSBC Singapore’s head of global trade and receivables finance.
The report predicts Singapore’s information and communications technology (ICT) exports will grow by 6 per cent per year until 2030 and forecasts imports to grow by 8 per cent annually over the same period. It says this shifting balance of trade reflects the move of ICT manufacturers to lower-cost countries. However, Singapore is well positioned to remain a global player in ICT trade.
Singapore is the highest ranked globally in the World Economic Forum’s annual Networked Readiness Index, which indicates a country’s ability to exploit the opportunities offered by ICT.
“Practically speaking, we are seeing ICT businesses in Singapore move up the value chain by shifting production to lower-cost manufacturing economies in the region but centrally retaining their intellectual property, sales, distribution and decision-making in Singapore,” said Mr Arena.