Although there has been a surprise decline in Singapore non-oil domestic exports (NODX) in May, demand for electronics has remained intact, according to Enterprise Singapore’s media release on June 17.

NODX fell 3.5% from a year ago compared to the 12.4% gain in April, while declining 12% on a seasonally-adjusted month-on-month basis.

Non-electronic products at a drop of 5.3% were the key drag, led by petrochemicals with a 17.8% decline, non-monetary gold which plunged 25.9% and specialised machinery with a 11.7% drop.

Unexpected slump

This marked the first decline in non-oil domestic exports since January and the strongest contraction in seven months amid the imposition of US tariffs, with exports to the US plunging 20.6% y-o-y.

“In the absence of drags from petrochemicals and non-monetary gold, the NODX decline would have been much smaller at 0.7% y-o-y,” write Maybank Securities analysts Chua Hak Bin and Brian Lee Shun Rong.

Developments in May include safe-haven gold demand easing on the back of the US-China tariff de-escalation, petrochemical shipments remaining weak due to lacklustre downstream demand and oversupply from China’s capacity expansion.

The 20.6% drop, they note, was dragged down by specialised machinery, food preparations and miscellaneous manufactured articles.

Meanwhile, Singapore NODX to Malaysia and Thailand also declined, led by non-monetary gold.

Growth in electronics

On the other hand, electronic NODX continued to grow in May at 1.7%, albeit at what Chua and Lee note at its slowest pace in an eight-month expansion streak.

Within this, leading drivers were personal computers (PC), which increased by up to 50.9% and consumer electronics, which grew by 49%.

Electronic NORX that were re-exports outperformed NODX, surging by 30% in May, owing to PCs which leapfrogged by a whopping 284.3%, integrated circuits (IC) at 12.6% and telecommunications equipment at 42.9%.

“Robust electronics demand led overall NORX to expand by a respectable 16% in May. Among the top 10 markets, NORX to Taiwan, the US and Vietnam saw the strongest growth. The strong non-oil re-export growth in both April and May bodes well for 2QFY2025 wholesale trade services, which accounts for 13% of gross domestic product (GDP),” write Chua and Lee.

Downwards growth forecast

Overall, the Maybank analysts reiterate their 2025 GDP growth forecast of 2.4%, above the Ministry of Trade and Industry’s (MTI) forecast of 0% to 2% and full-year NODX growth projection of 1%.

They write: “While the frontloading boost could be starting to cool, the decline in May NODX was amplified by idiosyncratic factors in the form of non-monetary gold and petrochemicals. Electronics demand remains strong, partly due to the US tariff exemptions and rising tech demand as AI adoption broadens.”

Meanwhile, RHB Bank economist Barnabas Gan and analyst Laalitha Raveenthar note that the MTI has flagged out key risks to GDP growth.

These include a sharper-than-expected global slowdown, a possible re-escalation of trade tensions into a full blown trade war, and recessionary pressures that could trigger destablising capital flows.

Both forecast the country’s GDP growth to be 2%.

“However, there may be upside potential for overall NODX performance as tariff risks gradually ease in the second half of the year,” they say, maintaining a cautious view of Singapore’s export-oriented sectors such as chemicals, machinery and transport equipment, and manufacturing.

On tariffs and tensions

On the US-China 90-day truce from May to August, Chua and Lee note a potential boost in trade volumes, thus supporting manufacturing and exports.

Nonetheless, manufacturing sentiment remains weak, DBS Group Research (DBS) economist Chua Han Teng adds, highlighting that exporters are vulnerable to the tariff “roller coaster”.

Still, exports could face some payback and slowdown in the second half, with the magnitude dependent on tariff outcomes for trading partners with the conclusion of the truce on July 8.

The US could also unveil sector tariffs on electronics and pharmaceutical goods, which are currently exempt.

However, the positivity of pharmaceutical exports, which grew 21.1% y-o-y, possibly reflect some effects of front loading in the face of incoming tariffs, writes United Overseas Bank(UOB) associate economist Jester Koh.

Singapore, which faces a low baseline reciprocal tariff rate of 10% and an effective tariff rate of 5.1%, based on Maybank analysts Chua and Lee’s estimates, is negotiating for tariff exemptions on pharmaceutical exports and preferential access to advanced chips.

“The sluggish NODX outturn in May did not come as a huge surprise given there was some evidence that export activity to trading partners were slowing,” adds Koh, who cites South Korea and Taiwan’s imports from Singapore as examples for the month of May.

Both RHB and UOB forecast a similar range of 1% to 3%, down from 2% to 4% previously, attributing payback from earlier front-loading which could lead to a more protracted downturn in trade activity, as well as escalating geopolitical tensions in the Middle East which could further dampen business and consumer confidence.

Chua and Lee write: “We expect the Monetary Authority of Singapore (MAS) to maintain the current modest appreciation bias at the upcoming July meeting and for the rest of 2025, having reduced the slope of its Singapore dollar nominal effective exchange rate (S$NEER) policy band for two straight meetings in January and April.”

They conclude: “We are forecasting the 3-month Singapore overnight rate average (SORA) rate, currently at 2.2%, to fall to 1.7% by end-2025 on safe-haven flows and US Federal Reserve (US Fed) rate cuts in the second half of the year.”