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Singapore’s economy grew 3.6% in 2017, trade reverses decline

SINGAPORE – Boosted by strong growth in the manufacturing and services sectors, the Republic's economy beat expectations to grow by 3.6 per cent last year, the Ministry of Trade and Industry (MTI) said on Wednesday (Feb 14).

SINGAPORE – Boosted by strong growth in the manufacturing and services sectors, the Republic's economy beat expectations to grow by 3.6 per cent last year, the Ministry of Trade and Industry (MTI) said on Wednesday (Feb 14).

Economic growth for the last quarter of 2017 came in at 3.6 per cent, on a year-on-year basis, higher than the advance estimate of 3.1 per cent. Earlier estimates had put Singapore's full-year growth for 2017 at 3.5 per cent.

The final economic data prompted UOB to raise its growth forecast for this year from 2.5 per cent to 2.8 per cent. although others maintained their projections.

Nevertheless, MTI said economic growth this year is expected to moderate from 2017 "but remain firm". It added: "MTI's central view is for gross domestic product (GDP) growth to come in slightly above the middle of the forecast range of 1.5 per cent to 3.5 per cent."

The improved showing last year — the Republic's economy grew 2.4 per cent in 2016 — came on the back of robust export growth. Trade agency International Enterprise (IE) Singapore said the Republic's total merchandise trade and non-oil domestic exports (NODX) grew in 2017, reversing declines in previous years. The agency also raised this year's growth projections for total merchandise trade and NODX.

Total merchandise trade rose 11.1 per cent in 2017, after falling 4.9 per cent and 8.9 per cent in 2016 and 2015 respectively. Meanwhile, NODX grew by 8.8 per cent last year, compared to a decline of 2.8 per cent in 2016.

"it's clear that the "green shoots" in the economy are driven by the tradeable sector. This certainly is good news as it signals a cyclical recovery in global demand," said UOB economist Francis Tan.

Going forward, Mr Tan was optimistic that the electronics and precision engineering clusters will continue to grow this year. However, the expansion of the semiconductors sector could moderate, due to a high base effect and slower sales in the Asia Pacific region.

DBS senior economist Irvin Seah said there could be a switch in the main engine of growth this year. "Growth in the manufacturing sector will moderate as global economic conditions normalise… In contrast, the strength in the services sector is likely to persist from a positive spillover from global recovery into the domestic sector. The externally oriented service segment will also continue to benefit from the improving external environment," he said.

The manufacturing sector expanded by 10.1 per cent year-on-year in 2017, compared to 3.7 per cent in 2016. Meanwhile, the services sector grew by 2.8 per cent last year, compared to 1.4 per cent in 2016.

MTI said it expects the manufacturing sector to continue supporting overall growth in the Singapore economy this year. Nevertheless, growth could broaden to domestically-oriented services sectors including retail and food services, on the back of improving consumer sentiments as the labour market recovers.

However, the construction sector, which shrank by 8.4 per cent in 2017, is expected to remain "lacklustre" due to persisting weakness in demand, particularly from the private sector. The sector shrank in all four quarters last year on a year-on-year basis. The outlook for the marine and offshore engineering segment — which has been hit hard by low oil prices and excess capacity in the global offshore rig market — is also expected to remain challenging.

Overall, global macroeconomic risks have receded to some extent since the end of 2017, MTI said. However, there remain some downside risks such as protectionist sentiments and inflationary conditions.

IE Singapore said it expects oil prices to be generally higher this year but growth could ease for some of Singapore's key trade partners, including China, Japan and the eurozone.

"Taking all these into consideration, the 2018 growth projection for NODX and total trade are adjusted upwards to 1.0 per cent to 3.0 per cent, and 3.0 per cent to 5.0 per cent respectively," the trade agency added.

 

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