Skip to main content

Advertisement

Advertisement

Singapore shaves 2016 growth forecast, but should avoid technical recession

SINGAPORE — On the back of a contraction in the third quarter, Singapore has cut the top end of its full-year growth forecast for this year by half a percentage point, with the economy now expected to grow between 1 and 1.5 per cent.

SINGAPORE — On the back of a contraction in the third quarter, Singapore has cut the top end of its full-year growth forecast for this year by half a percentage point, with the economy now expected to grow between 1 and 1.5 per cent. 

This is the second time in less than four months that the official forecast has been revised, amid a global trade slump. 

But the Republic should avoid a technical recession — defined as two consecutive quarters of contraction — with “modest” economic growth projected for the final quarter of the year, supported by sectors such as electronics, information and communications and other services industries, said Permanent Secretary (Trade and Industry) Loh Khum Yean at a press briefing on Thursday (Nov 24), without elaborating. 

Citing sluggish global economic conditions, the Ministry of Trade and Industry (MTI) said full-year growth this year will likely be “marginally weaker” than last year’s growth of 2 per cent — which was already the weakest annual growth since 2009. 

For next year, MTI forecast gross domestic product (GDP) to grow between 1 and 3 per cent.

Final data from the MTI showed that the economy shrunk less severely — by 2 per cent on a seasonally adjusted annualised basis — in the third quarter, than previously reported in advance estimates (-4.1 per cent) released last month. The manufacturing sector fared better than estimated, even though the segment contracted quarter-on-quarter by 9.1 per cent, reversing from an expansion of 2.1 per cent in the previous quarter. 

On a year-on-year basis, the Singapore economy grew by 1.1 per cent between July and September, down from the 2 per cent growth in the second quarter. 

At the start of the year, the economy was forecast to grow between 1 and 3 per cent. In August, the range was narrowed to 1 to 2 per cent.

UOB economist Francis Tan said the “constant downward revision” of GDP growth reflects not only the weak external demand that has bugged the economy since 2014, but also shows that “weakness had infiltrated into the domestic sectors too”. “Today’s numbers further proves the point that although longer term support for businesses is important, more short term measures are required to help businesses at least survive this difficult period,” Mr Tan said. 

Prior to the release of the latest economic data, there had been some concerns that Singapore could slip into a technical recession, after exports plunged 12 per cent in October year-on-year - the lowest in seven months. Last week, labour chief Chan Chun Sing noted that it was too early to tell whether a technical recession will happen. Mr Chan, who is also a Minister in the Prime Minister’s Office, said that businesses should focus on long-term fundamentals instead of short-term numbers. 

ANZ economist Ng Weiwen maintains that the economy is at risk of a technical recession, given that “sequential growth still remains entrenched in negative territory”. But he added: “Even if the economy slips into a technical recession, the recession will be largely technical in nature in that the extent of contraction will be mild and more modest than during the decline during the global financial crisis in 2008 and 2009.” 

Year-on-year, the manufacturing sector expanded by 1.3 per cent, compared to a 1.4-per-cent growth in the previous quarter. The expansion was supported by the electronics and precision engineering clusters which were boosted by greater external demand for semiconductors and semiconductor equipment. Services producing industries was flat between July and September, compared to a 1.2-per-cent growth in the second quarter. On a quarterly basis, services producing industries contracted by 1.3 per cent. 

Separately, Singapore’s exports forecast for the year was also slashed amid the global trade slump. Thursday’s downward revisions of the GDP and trade projections saw the Singapore dollar hit a 10-month low of S$1.4362 against the United States dollar. 

The Monetary Authority of Singapore (MAS) said the GDP forecasts for this year and next year are “within the planning parameters” of the central bank’s October monetary policy decisions. “As we had highlighted (last month)... the Singapore economy is not expected to pick up significantly in 2017 and core inflation will rise only gradually next year. As such the monetary policy stance remains as announced in October.” said MAS deputy managing director Jacqueline Loh.

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.