Singapore likely to be marginally affected by Brexit in the near term

The effect of Brexit is likely to affect Singapore marginally in the near term, given that the equity market has already responded negatively on the Black Friday of June 24, and the SGD has depreciated against the greenback by 1.65 percent.

Non-oil domestic exports (NODX) to the United Kingdom account for about 1 percent of Singapore’s total NODX. Imports from UK constitute about 2 percent of Singapore’s total imports. So from the trade perspective, the impact is likely to be benign. In addition, Brexit is unlikely to affect British companies already operating in Singapore, DBS reported.

Separately, in line with expectation, industrial production for May reported a modest rise of 0.9 percent y/y. This is down from 2.9 percent in the previous month. If biomedical manufacturing is excluded, output fell by 2.3 percent y/y. Sequentially, industrial output was down by 0.4 percent m/m, seasonally adjusted. Without biomedical, IP dipped by 1.4 percent compared to the previous month.

The 11.6 percent y/y surge in May NODX came largely on the back of a spike up in some unusual export products, which is unlikely to be sustainable. Non-electronics jumped by 19 percent y/y, driven by the exports of prefabricated buildings and non-monetary gold (436.7 percent).

Furthermore, the EU-Singapore Free Trade Agreement negotiation has not been completed yet. Therefore, it leaves no risk of preferential treatment for companies, thereby, not hurting the economy, by any means. Moreover, the entire Brexit process will not happen overnight. It will take a while for terms and conditions to be negotiated and agreed upon, while businesses, investors and consumers will have time to adjust.

"There will be ripple effect across the global economy, which is still struggling with the structural slowdown in China. It’ll be a double whammy for emerging Asia," DBS commented in its latest research report.