Unless government incentivizes productivity and efficiency boosts, says Maybank.
The sound of alarm came as NODX ended the year on a negative note, slumping 16.3% yoy. Maybank Kim Eng predicts that 2013 will hold a "mildly better" performance for NODX as external demand conditions pick up. But this recovery could be countered by the risk of rising operating costs driven by stricter foreign hiring and continuing SGD appreciation.
Here's more from Maybank Kim Eng:
A mildly better NODX performance in 2013. We expect NODX to expand by +4.0% in 2013 (official: +2.0% to +4.0%) on the back of improvement in external demand conditions as global economic growth is projected to stabilise at +3.4% this year after two years of slowdown and world trade is seen picking up to +4.7% this year from +2.8% last year. The prospect of better global economic conditions is indicated by the trends in purchasing managers index (PMI) and world trade value/volume that suggest the downturn in much of last year had bottomed and picked up in late-2012, signaling a better 2013.
A key risk to our 2013 NODX forecast is “structural drag” cancelling out the “cyclical drive” i.e. Singapore’s export sector losing competitiveness due to rising operating costs – including the tight labour market due to stricter conditions on the hiring of foreign workers – and the continuation of the current exchange rate policy stance i.e. gradual SGD appreciation. To this end, the upcoming Budget 2013 may contain measures to address the issue, particularly in incentivizing investment to boost productivity and efficiency.
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