SINGAPORE — The Republic’s economy expanded faster than expected in the last three months of 2016, growing 2.9 per cent year-on-year, on the back of a late surge in the manufacturing and services sectors.
The final economic data for October to December last year was much better than advance estimates released last month (1.8 per cent). The better-than-expected performance prompted some economists to revise upwards their growth forecasts for this year, and prevented the Singapore economy from posting its worst performance since 2009. The strong Q4 data pushed full-year growth for 2016 to 2 per cent, above the advance estimate of 1.8 per cent — which would be lower than the 1.9 per cent growth recorded in 2015.
Nevertheless, the Ministry of Trade and Industry (MTI) — which released the data on Friday (Feb 17) — maintained its 2017 growth forecast at between 1 per cent and 3 per cent. Global growth is projected to pick up slightly this year, with growth in the United States and key Association of South-east Asian Nations (Asean) economies expected to improve, even as growth in China continues to moderate, the MTI said. Externally-oriented sectors such as manufacturing as well as transportation and storage are likely to support economic growth.
However, uncertainties and downside risks in the global economy remain, including a “lack of clarity” on US President Donald Trump’s policies, the MTI noted. “Political risks and economic uncertainties have risen. Even as the United Kingdom navigates through “Brexit”, upcoming elections in key Eurozone economies may create further uncertainties regarding the future of the monetary union,” the ministry said.
Reiterating concerns over rising protectionism in the West, the MTI added: “If protectionist approaches become the norm, global trade will be adversely affected, with knock-on effects on economic growth worldwide.”
In the fourth quarter of last year, the manufacturing sector grew 11.5 per cent year-on-year, up from 1.8 per cent the preceding quarter, due to the robust growth in the electronics and biomedical manufacturing clusters.
The services sector expanded by 1 per cent year-on-year for the same period, up from 0.4 per cent in the third quarter. The expansion was fuelled mainly by segments such as transportation and storage, as well as information and communications. The construction sector shrank by 2.8 per cent, extending from the previous quarter’s decline of 2.2 per cent, weighed down primarily by a fall in private sector construction activities.
The advance gross domestic product (GDP) estimates for the fourth quarter of last year were computed largely based on data from October and November.
UOB economist Francis Tan said that “robust performance in the tradeable sector such as the manufacturing and transport/storage sectors contributed strongly” to the final data. “Slow economic growth due to weak external demand probably bottomed out in the first half of last year as the manufacturing engine cranked up to boost Singapore’s tradeable sector in the second half of the year,” he said. “We think that this will be positively spilling over to the non-tradable sectors.”
UOB on Friday revised upwards its full-year growth forecast for the economy from 1.8 per cent to 2.4 per cent, based on expectations of an improvement in global demand and a “further fiscal impulse” from the Budget, which will be unveiled on Monday.
However, OCBC maintained its forecast range of between 1 and 2 per cent. OCBC economist Selena Ling noted that the manufacturing momentum may falter should external risks come to pass, including the Trump administration hardening its stance towards trade. Meanwhile, some segments including marine and offshore, retail and food services are still not out of the woods yet, she said.
The MTI reiterated that global economic uncertainties may weigh in on business and consumer confidence, dampening investments and consumption and causing a pullback in global growth. Also, if monetary conditions tighten further in China and result in a steeper-than-intended pullback in credit, investment spending and growth in China could slow down more sharply than expected, the MTI added.
Singapore will keep its current monetary policy stance, as the GDP growth forecast range for this year stays “within the planning parameters” of the Monetary Authority of Singapore’s (MAS) October policy decision, said MAS deputy managing director Jacqueline Loh. “So as such, the monetary policy stance remains as announced in October, of a zero per cent rate of appreciation for the Singapore dollar NEER policy band.”