30 Economic Survey of Singapore Second Quarter 2023

Box Article 2.1

SINGAPORE’S WHOLESALE TRADE SECTOR

The wholesale trade sector is the largest services sector in Singapore, accounting for 18.6 per cent of Singapore’s
nominal value-added (VA) in 2022.1 This article examines recent trends in the performance of the wholesale trade
sector,2 as well as its near-term outlook.

Activities in the wholesale trade sector range from the buying and selling of goods to storage
and warehousing, as well as marketing

Wholesalers purchase goods in bulk from domestic or foreign manufacturers or other suppliers. They may then store
these goods in warehouses, thereby reducing the storage and inventory management burden of manufacturers. To sell
the goods purchased, wholesalers leverage their network of existing and past clients, as well as engage in marketing
to attract new ones.3 Once the goods have been sold, wholesalers fulfil the orders through a distribution system.
Wholesalers may also offer other services to their clients such as marketing support, training, post-sales services
and financing.4

In Singapore, a large proportion of wholesale sales are to overseas buyers

Singapore-based (i.e., local) wholesalers perform transactions with both local and overseas buyers. Transactions
between local wholesalers and local buyers are categorised as domestic wholesale trade, while those between local
wholesalers and overseas buyers are categorised as foreign wholesale trade. Foreign wholesale trade activities account
for the bulk of the revenue generated (91.0 per cent in 2021) in the wholesale trade sector (Exhibit 1).

Exhibit 1: Wholesale trade activities are categorised as domestic or foreign

Segment Revenue Share (2021, Per Cent) Description

Refers to the sale of imported or locally

Domestic Wholesale Trade 9.0
manufactured goods to local buyers

Refers to the sale of imported or locally

Foreign Wholesale Trade 91.0
manufactured goods to foreign buyers

Source: Singapore Department of Statistics

The performance of Singapore’s wholesale trade sector is highly dependent on the global
macroeconomic environment

Given the dominance of foreign wholesale trade activities undertaken by firms in the wholesale trade sector in Singapore,
the performance of the sector is highly dependent on the global macroeconomic environment. Mirroring the growth in
world merchandise trade volume, the real VA of the wholesale trade sector has risen steadily over the years (Exhibit
2). Between 2016 and 2019, world merchandise trade volume and the real VA of the wholesale trade sector rose by 2.8
per cent per annum (p.a.) and 2.4 per cent p.a. respectively. While both world merchandise trade volume and the real
VA of the wholesale trade sector took a hit in 2020 as a result of the COVID-19 pandemic, they posted strong rebounds
of 6.0 per cent p.a. and 6.3 per cent p.a. respectively from 2020 to 2022 to exceed their pre-pandemic levels.

1 The sector’s nominal VA share is second only to the manufacturing sector (21.6 per cent of Singapore’s nominal VA in 2022).
2 See Tee (2008) and Yeow and Tan (2011) for previous overviews of the wholesale trade sector.
3 Clients can include retailers, other wholesalers and industrial, commercial or institutional customers.
4 Akerman (2018) indicates that wholesalers are able to sell goods overseas at a lower cost than producers by spreading the fixed costs of exporting goods (e.g.,
establishing an international distribution network) across multiple goods, thus benefiting from economies of scope.
 Chapter 2: Sectoral Performance 31

Exhibit 2: World merchandise trade volume and the real VA of Singapore’s wholesale trade sector have recovered to above
pre-COVID levels

Index (2019 = 100) Million $

110 75,000

105
70,000

100
65,000
95
60,000
90

55,000
85

80 50,000
2016 2017 2018 2019 2020 2021 2022

World Merchandise Trade Volume (LHS) Real VA of Wholesale Trade Sector (RHS)

Source: World Trade Organisation, Singapore Department of Statistics

For a better understanding of the drivers of the wholesale trade sector in recent years, the next two sections analyse
the performance of the sector by the types of buyers (i.e., foreign versus domestic wholesale trade) and the types of
products traded.

Over the years, foreign wholesale sales volume has grown more robustly than domestic
wholesale sales volume

Prior to the pandemic, the sales volume of foreign wholesale trade, as measured by the foreign wholesale trade
index (WTI),5 increased at a compounded annual growth rate (CAGR) of 1.3 per cent between 2016 and 2019, while
that of domestic wholesale trade declined at a CAGR of 0.3 per cent over the same period (Exhibit 3). The key drivers
of foreign wholesale sales volume over this period were growth in the sales of telecommunications & computers and
petroleum & petroleum products, whereas domestic wholesale sales volume was weighed down by declines in the
sales of electronic components.

Over the subsequent pandemic and post-pandemic recovery period of 2019 to 2022, foreign wholesale sales volume
expanded at a faster pace of 4.7 per cent p.a. on the back of robust growth in the foreign wholesale sales of electronic
components and telecommunications & computers. This could in turn be attributed to a spike in global demand for
PCs (e.g., desktops, laptops and high-performance workstations) as consumers worldwide spent more time working
and learning from home as a result of social restriction measures. In particular, worldwide shipments of PCs surged
by 31.3 per cent between 2019 and 2021, and even though shipments fell by 16.5 per cent in 2022, they remained well
above pre-pandemic levels.6

On the other hand, domestic wholesale sales volume fell by 7.7 per cent p.a. between 2019 and 2022. Domestic
wholesale sales volume was weighed down by a decline in the sales of petroleum & petroleum products as the
reduced consumption of fuel by aircraft and private vehicles amidst travel restrictions during the pandemic led to a
fall in domestic oil demand.

5 The Department of Statistics (DOS) compiles the quarterly Wholesale Trade Index (WTI) to measure the short-term performance of the wholesale trade sector. The
index consists of the Domestic WTI and Foreign WTI, and is based on data from DOS’ Quarterly Survey of Services (QSS) and other administrative sources.
6 According to the International Data Corporation (IDC) Worldwide Quarterly Personal Computing Device Tracker, worldwide PC shipments reached 350.1 million
units in 2021, the highest level of shipments recorded since 2012. Despite falling to 292.3 million units in 2022, worldwide PC shipments remained above the 266.7
million units posted in 2019.
32 Economic Survey of Singapore Second Quarter 2023

Exhibit 3: Between 2019 and 2022, the foreign wholesale trade index (WTI) rose at a quicker pace compared to the pre-
pandemic period, while domestic WTI further contracted

Index (2019 = 100)

140
Pre-COVID Wholesale Post-COVID Wholesale
Volumes Volumes
120

100

80

2016 - 2019 (CAGR) 2019 – 2022 (CAGR)

60 Foreign WTI: Foreign WTI:
1.3 per cent 4.7 per cent
40 Domestic WTI: Domestic WTI:
-0.3 per cent -7.7 per cent
20

0
2016 2017 2018 2019 2020 2021 2022

Foreign WTI Foreign WTI (Excluding Petroleum)

Domestic WTI Domestic WTI (Excluding Petroleum)

Source: Singapore Department of Statistics

In terms of the types of products traded, the wholesaling of fuels & chemicals was the fastest
growing segment prior to the pandemic…

Pre-pandemic, the wholesaling of fuels & chemicals (F&C) represented the fastest growing segment in the wholesale
trade sector (Exhibit 4). Between 2016 and 2019, the real VA of the F&C segment grew at a CAGR of 7.5 per cent on
account of the robust expansion of the wholesale sales of petroleum & petroleum products (including fuel oil, liquefied
petroleum gases and lubricating oils).

Meanwhile, the real VA from the wholesale sales of machinery, equipment & supplies (MES) increased by 1.5 per cent
p.a. over the same period, driven by growth in the wholesaling of electronic components (e.g., capacitors, semiconductor
devices and microchips), as well as telecommunications equipment & computers (e.g., handphones and peripheral
equipment, smart watches and tablets).

On the other hand, the others7 segment contracted marginally by 0.1 per cent p.a. due to a decline in general wholesale
trade.

…but the machinery, equipment & supplies segment became the fastest growing segment in
more recent years

Over the more recent period of 2019 to 2022, the MES segment outperformed the F&C segment, with the real VA of
the MES segment increasing at a CAGR of 11.1 per cent even as that of the F&C segment contracted by 5.0 per cent
p.a.. At the same time, the others segment continued to decline by 0.4 per cent p.a. over this period.

The robust growth of the MES segment between 2019 and 2022 was driven by strong expansions in the wholesaling
of electronic components (e.g., semiconductors) and telecommunications & computers on the back of sustained
demand for automotive and consumer electronics, with the latter partly arising from more prevalent work-from-home
practices during and after the pandemic. By contrast, the decline in the real VA of the F&C segment was driven by a
contraction in the wholesale sales of petroleum & petroleum products due to a fall in jet fuel demand as international
travel was badly hit by the pandemic.

7 The others segment comprises a diverse range of products including metals, timber & construction materials, household equipment & furniture as well as food,
beverages & tobacco, among others.
 Chapter 2: Sectoral Performance 33

By 2022, the MES segment’s share of the nominal VA of the wholesale trade sector had risen to 49.7 per cent, from its
2019 share of 43.5 per cent. On the other hand, the F&C segment’s share had fallen to 21.4 per cent, from 26.6 per cent,
over the same period. The others segment accounted for the remaining 28.9 per cent of the sector’s nominal VA in 2022.

Exhibit 4: While growth of the fuels & chemicals segment outpaced that of the machinery, equipment & supplies segment
prior to the pandemic, the trend reversed in more recent years

Real VA (Million $)
50,000 Wholesale Trade’s Wholesale Trade’s
Pre-COVID VA Post-COVID VA
45,000
2016-2019 (CAGR) 2019-2022 (CAGR)
40,000 MES: 1.5 per cent MES: 11.1 per cent
F&C: 7.5 per cent F&C: -5.0 per cent
35,000 Others: -0.1 per cent Others: -0.4 per cent

30,000
25,000
20,000
15,000
10,000
5,000
0
2016 2017 2018 2019 2020 2021 2022

Machinery, Equipment & Supplies Fuels & Chemicals Others

Source: Singapore Department of Statistics

Looking ahead, global economic headwinds have dampened the outlook of the wholesale trade
sector

With the slowdown in the global economy, the wholesale trade sector contracted in the first quarter of 2023 (-1.7 per
cent year-on-year), the first quarterly decline since the onset of the COVID-19 pandemic in 2020. The contraction was
due to a decline in wholesaling activity in the others segment on the back of a fall in the wholesale sales of metals,
timber & construction materials, even as the performance of the MES segment remained lacklustre on account of
the electronics downcycle. While the sector returned to growth in the second quarter (1.1 per cent year-on-year) due
to expansions in the MES (specifically, the wholesale sales of telecommunications & computers) and F&C segments,
the sector’s near-term outlook remains weak given continued global economic headwinds.

Notably, the global economic outlook for the rest of the year remains tepid. Growth in the advanced economies such
as the US and Eurozone is expected to weaken in the second half of the year as the cumulative effects of tighter
monetary policy weigh on demand. Meanwhile, China’s growth is projected to moderate in the second half as the
post-pandemic recovery in its services activity slows in line with waning consumer confidence, even as its property
sector remains weak and subdued external demand continues to weigh on its industrial activity. At the same time, the
global electronics downturn is likely to be protracted, with a gradual recovery expected towards the end of the year at
the earliest. Against this backdrop, the International Monetary Fund (IMF) has projected that global trade growth will
moderate to 2.0 per cent in 2023, below the 2016 to 2019 average of 3.2 per cent.

Given the external economic headwinds, full-year growth in Singapore’s wholesale trade sector is expected to moderate
in 2023 from that in 2022 (3.2 per cent). Nonetheless, the longer-term outlook for the sector remains bright given that
Singapore is poised to remain as a dynamic advanced manufacturing and global trade hub under our Manufacturing
20308 and Trade 20309 strategies.

8 For example, under Manufacturing 2030, Singapore is aiming to grow a vibrant core of innovative Singapore global manufacturers that can deliver distinctive
offerings, thereby enhancing the competitiveness of our local wholesalers in the supply chain.
9 For example, one of the strategies under Trade 2030 is to grow Singapore’s trading volume and widen the types of trading activities that take place here, such as
by attracting leading global traders to Singapore.
34 Economic Survey of Singapore Second Quarter 2023

Contributed by:

Ms Ngoh Jia Hui

Economist
Economics Division
Ministry of Trade and Industry

References

Anders, Akerman. 2018. “A theory on the role of wholesalers in international trade based on economies of scope”,
Canadian Journal of Economics, 51(1), pp. 156-185.

International Monetary Fund. 2023. World Economic Outlook Update.

Koon Hui, Tee. 2008. “Overview of Singapore’s Wholesale Trade Sector”, Economic Survey of Singapore First Quarter
2008, pp. 51-56.

Yeow, Kenneth, and Tan, Adrian. 2011. “Overview of Singapore’s Wholesale Trade Sector”, Economic Survey of Singapore
First Quarter 2011, pp. 12-18.
Chapter 2: Sectoral Performance 35