Skip to main content

Advertisement

Advertisement

Q3 GDP growth beats estimates, but 2015 forecast cut to nearly 2%

SINGAPORE — Singapore avoided a technical recession with a flourish after the services sector provided some relief from a slump in the manufacturing sector, but the government still trimmed its growth forecast for the year, citing sluggish global economic conditions.

SINGAPORE — Singapore avoided a technical recession with a flourish after the services sector provided some relief from a slump in the manufacturing sector, but the government still trimmed its growth forecast for the year, citing sluggish global economic conditions.

Gross domestic product (GDP) rose 1.9 per cent on a quarter-on-quarter seasonally adjusted annualised basis, data released by the Ministry of Trade and Industry showed today (Nov 25), well above the marginal growth of 0.1 per cent growth reported in MTI’s flash estimates last month. 

The final third-quarter print draws a line under months of speculation by economists on the Republic entering into a technical recession — typically defined as two consecutive quarter-on-quarter GDP contractions — following weak exports and industrial output figures over the last few months. Second-quarter GDP had contracted a revised 2.6 per cent.

“As expected, the growth was generated by a strong services sector, which was more than enough to offset the persistent weakness in the manufacturing sector. Among the various service segments, accommodation & food services posted the strongest growth, followed by transportation & storage and wholesale & retail trade,” said Dr Tan Khay Boon, senior lecturer at SIM Global. “This growth can be attributed to the improvements in tourist arrivals and also full employment which supported strong domestic demand,” said Dr Tan.

On an on-year basis, GDP also expanded by 1.9 per cent for the July to September period, marginally lower than the 2 per cent growth in the preceding quarter, MTI said today. This compares with the 1.4 per cent growth reflected in the flash estimates.

However, economists cautioned that it may be too early to celebrate as downside risks for the Republic are still present.

“It may be too early to break out the champagne,” said Ms Selena Ling, head of treasury research & strategy at OCBC Bank, citing a challenging external environment. Downside risks remain intact, Ms Ling said, with risks coming from China’s ongoing reforms and financial volatility, low commodity prices, anticipated normalisation of US monetary conditions, and potential sudden and large capital outflows from regional countries.

“The growth outlook remains a two-gear Singapore economy, with support coming from finance & insurance and wholesale trade, whereas manufacturing and specific sectors like marine & offshore (due to sustained low oil prices) and labour-intensive industries like retail and food services (due to labour constraints) will remain weak,” Ms Ling added.

The services sector, which accounts for about two-thirds of Singapore’s economic activity, grew 3.5 per cent from the previous quarter, sharply better than the 0.8 per cent growth reported in the flash estimates and the 0.2 per cent contraction in the second quarter.

On an on-year basis, the sector grew 3.6 per cent, unchanged from the previous quarter. 

The manufacturing sector shrunk 4.6 per cent in July-September from the previous quarter, faring worse than the 3.6 per cent contraction flashed in the advance estimates, but much better than the 17.3 per cent decline in the April-June quarter, MTI said.

Year-on-year, the manufacturing sector contracted for the fourth consecutive quarter: it fell 6.2 per cent in the third quarter, extending from the 4.8 per cent decline in April-June. The decline was mainly due to a fall in output of the transport engineering, electronics and precision engineering clusters.  

Today, MTI also narrowed its growth forecast for the Singapore economy this year to “close to 2 per cent”, the lower end of its earlier forecast for an expansion of between 2 and 2.5 per cent. GDP growth came in at 2.9 per cent last year. 

“Global economic conditions have remained sluggish, with full-year growth for 2015 likely to come in weaker than in 2014,” MTI said, noting that manufacturing is expected to remain weak amid a challenging external environment. 

Next year though, global growth is expected to improve, supported by a strengthening of growth in the advanced economies and improvements in most emerging market and developing economies, MTI added. It expects Singapore’s economy to expand at a “modest pace” of between 1 and 3 per cent.

Today, Singapore’s central bank commented that the current monetary policy remains appropriate for the GDP growth projections. 

The MAS has eased its exchange-rate based monetary policy twice this year, most recently in October, to support growth. 

“These forecasts are all within the planning perimeters of the Monetary Authority of Singapore’s (MAS) October policy decision,” said MAS deputy managing director Jacqueline Loh.

Read more of the latest in

Advertisement

Popular

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.