NODX falls 3.3% in Q3 after four straight quarters of growth

Key Concepts

• Export Growth Forecast: Singapore's revised projection for key export growth in 2025.
• Non-Electronics Exports: A significant category within Singapore's exports that experienced a decline.
• AI Boom: The impact of Artificial Intelligence on economic growth and manufacturing.
• Tariff Risks: Potential negative effects of US tariff actions on demand and investment decisions.
• ASEAN Region: The Association of Southeast Asian Nations, highlighted for its lower US tariffs compared to China.
• Structural Uplifting vs. Hype-driven Boom: Distinguishing between sustainable economic growth and temporary trends.
• High Value Manufacturing: Singapore's goal of attracting and anchoring advanced manufacturing sectors.
• Consumer Demand: Factors influencing retail and Food & Beverage (FNB) sectors.
• Domestic Demand: Consumer spending within Singapore.
• External Demand (Tourism): Attracting foreign visitors to boost the economy.
• Non-Oil Domestic Exports (NODX): A key indicator of Singapore's export performance.
• De-escalation of Trade Tensions: A reduction in trade disputes and their potential positive impact.
• Interest Rate Trajectory: The projected path of interest rates, particularly in the US.

Singapore's Narrowed Export Growth Forecast for 2025

Singapore has revised its key exports growth forecast for 2025 downwards to approximately 2.5%. This adjustment from the earlier projection of 1% to 3% is attributed to moderating export gains, with a particular concern being potential renewed tariff actions from the US that could dampen demand.

Third Quarter Export Performance and Key Contributors

The latest export data for the third quarter of the current year revealed a 3.3% decline in Non-Oil Domestic Exports (NODX), reversing four consecutive quarters of positive growth. This downturn was primarily driven by a 6.5% year-on-year decrease in non-electronics exports. The most significant contributors to this decline were the food preparations, petrochemicals, and pharmaceuticals sectors.

Optimism for Future Exports and Economic Growth

Despite the recent slowdown, one analyst expresses optimism for exports in the next quarter and into 2026. This positive outlook is supported by the ongoing Artificial Intelligence (AI) boom and a projected shift in demand towards the ASEAN region, which benefits from lower US tariffs compared to China.

Barnabas Gun, Group Chief Economist at RHB Bank, elaborates on this perspective, stating, "We have this backdrop of slowing global growth uh which could um you know result in some uh some modest slowdown in our exports next year but at the same time uh we continue to expect exports to remain resilient um and we do not expect a downturn."

AI's Role in Economic Growth: Structural Uplifting

Regarding Singapore's 2025 GDP forecast, which is projected to reach around 4% driven by AI and manufacturing, Barnabas Gun clarifies whether this represents a structural uplift or a hype-driven boom. He argues that AI's deep integration into the modern economy, across manufacturing and services, suggests a more structural move towards a demand-fueled AI trend rather than mere hype. Gun poses the rhetorical question, "I think the question that we should ask ourselves is is AI going to go away and I think probably not."

Impact of Tariff Risks on High Value Manufacturing

The Ministry of Trade and Industry (MTI) has flagged delays in semiconductor firms' investment decisions due to tariff risks. This raises concerns about the ripple effects on Singapore's goal of anchoring high-value manufacturing. However, Singapore's strategic advantage lies in its lowest tariff rate within the ASEAN region. Recent US exemptions for ASEAN, including Singapore, mean that at least 40% of Singapore's exports to the US are currently tariff-exempt.

Gun explains the tariff advantage: "if we do account for say the 10% % tariff rate has been uh implemented in Singapore then technically the effective tariff rate it's 0.6* 10% which is 6%. uh and that is a very low print uh as compared to the rest of ASEAN." He further emphasizes Singapore's strong semiconductor and electronics sector, which should provide price and export competitiveness in the region.

Strategies to Boost Consumer Demand in Retail and FNB Sectors

Consumer-facing sectors like retail and Food & Beverage (FNB) are expected to remain subdued. To increase consumer demand, strategies can focus on either supporting domestic demand or fueling external demand through tourism. Singapore has been successful in attracting foreign demand through events like the F1 race and concerts, citing the significant tourism intake during Taylor Swift's concerts as an example.

For domestic demand, there is still room for improvement. Policies such as the distribution of vouchers and past support measures during the COVID-19 pandemic have historically boosted consumer growth and retail spending. These avenues are identified as key policy areas to support retail demand.

Drivers of NODX Volatility and Future Momentum

The 3.3% decline in NODX for Q3 is clearly linked to exporters' concerns about implemented tariffs, given Singapore's export-oriented economy. While exports have been subdued in the first half of the year due to tariff worries, the latest NODX figures have shown an upward movement. This suggests that if this momentum continues into 2026, the first half of 2026 could benefit from the strong momentum observed in the fourth quarter of the current year.

Key global trends supporting Singapore's exports include the dissipating tariff risk, with the US president granting more exemptions in the region, and the potential for lower US interest rates.

De-escalation of Trade Tensions and Optimism for 2026

Barnabas Gun expresses significant optimism for 2026, describing it as a scenario where "birds are chirping and the and and and and the skies are clear." This optimism stems from the de-escalation of tariff risks, a softer interest rate trajectory into 2026, and the strong performance of ASEAN exports, including Singapore's, in the third and fourth quarters of the current year. This positive performance is expected to build on year-on-year base effects, leading to a "quite sanguine first half 2026 story at least for Singapore."

Conclusion

Singapore's economic outlook for 2025 is characterized by a narrowed export growth forecast due to global economic slowdown and potential US tariff actions. However, the AI boom is seen as a structural driver of growth, and Singapore's strategic position within ASEAN, with its low tariff rates, offers a competitive advantage. While consumer-facing sectors require support, the de-escalation of trade tensions and a favorable interest rate trajectory point towards a more optimistic outlook for exports and the overall economy in 2026.