Singapore posts solid 1st-quarter growth on manufacturing

SINGAPORE — The Republic’s economy grew at a faster pace in the first quarter this year than initially estimated, supported by a healthy manufacturing sector.

Gross Domestic Product (GDP) rose at a seasonally adjusted, annualised rate of 1.7 per cent from the prior three months, said the Ministry of Trade and Industry on Thursday (May 24).

The Bloomberg survey median was 1.6 per cent, while government’s previous projection was 1.4 per cent

GDP expanded 4.4 per cent in the first quarter from the same period in 2017, in line with median estimate.

A surge in electronics demand underpinned the city state’s 3.6 per cent expansion last year, but as the export boom starts to moderate, GDP growth is set to ease to a more sustainable pace.

The MTI sees the economy expanding 2.5 percent to 3.5 percent this year, as growth broadens out to other sectors of the economy. That supports the central bank’s move to gradually tighten monetary policy this year.

The latest forecast is higher than the 1.5 per cent to 3.5 per cent range announced previously.

“On balance, the pace of growth in the Singapore economy is expected to remain firm in 2018, with growth supported primarily by outward-oriented sectors,” said the MTI’s statement.

Solid growth in electronics and precision engineering clusters, although more moderate this year, will help sustain manufacturing, it said.

While growth has been concentrated in export-related industries, it’s expected to broaden out to domestic-focused sectors this year, such as retail and food services, as the labor market improves, the ministry added.

Construction will probably remain lackluster, it said, “as the earlier weakness in construction demand, particularly from the private sector, is expected to continue to weigh on construction activities this year.”

Compared with a year ago, construction fell 5 per cent in the first quarter, after contracting 8.4 per cent for the whole of 2017. Manufacturing climbed 9.8 per cent in the first quarter, while the financial services industry surged 9.1 per cent.

Rising trade tension between the United Staes and China is among the biggest risks to global growth and export reliant Singapore. In addition, the MTI said the threat to emerging markets from rising US interest rates is a key downside risk.

In a separate release, Enterprise Singapore said that total merchandise trade grew by 2.5 per cent in the first quarter of 2018, while both non-oil exports and non-oil domestic exports also increased.

"On a year-on-year basis, Singapore's total merchandise trade grew by 2.5 per cent in 1Q 2018, following the 7.8 per cent increase in the previous quarter, as both oil and non-oil trade rose," said Enterprise Singapore.

Oil trade also increased by 5.1 per cent in 1Q 2018 amid higher oil prices than a year ago, after the 27.7 per cent growth in the previous quarter.

Non-oil trade rose by 1.9 per cent in 1Q 2018, following the previous quarter's 3.6 per cent increase. BLOOMBERG