SINGAPORE — Growth in the manufacturing and services industries helped Singapore’s economy expand 4.6 per cent in the third quarter from a year ago, according to advance estimates released by the Ministry of Trade and Industry (MTI) on Friday (Oct 13).
MTI’s estimate were higher than expected, and easily beat expectations among private sector economists. Those polled in the Monetary Authority of Singapore’s (MAS) survey of professional forecasters revealed last month estimated that Singapore’s third-quarter Gross Domestic Product (GDP) would grow 3.1 per cent.
But economists interviewed by TODAY in late September said they had already raised their third-quarter GDP forecasts, from above 3 per cent to 4.3 per cent, amid signs of positive momentum in manufacturing and non-oil domestic exports in August, as well as indications that economic growth had broadened to the services sector.
According to MTI, the Singapore economy expanded by 6.3 per cent in the third quarter from the previous three months, on a seasonally adjusted annualised basis, extending the 2.4 per cent expansion in the second quarter.
Mr Joseph Incalcaterra, chief ASEAN economist at HSBC Global Research, said: “Growth was primarily driven by robust manufacturing output, as recent industrial production data suggested, but services also performed better than expected, a reflection of the optimistic reading in the sector’s leading indicator.”
The manufacturing sector expanded by 15.5 per cent on a year-on-year basis in the third quarter, faster than the 8.2 per cent growth in the previous quarter. Growth was supported mainly by “robust expansions in the electronics, biomedical manufacturing and precision engineering clusters,” the MTI said.
The services industries grew by 2.6 per cent year-on-year in the third quarter, similar to the 2.5 per cent growth in the previous quarter. Growth was largely supported by the finance & insurance, wholesale & retail trade and transportation & storage sectors.
Meanwhile, the construction sector continued to decline, contracting for the third straight quarter on a year-on-year basis. Growth was down 6.3 per cent from a year ago, extending the 6.8 per cent decline in the previous quarter. The sector was weighed down primarily by continued weakness in private sector construction activities.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye raised their GDP annual forecast for the Republic following the advance estimates, from 3 per cent to 3.2 per cent. For next year, growth projections were also raised from 2.4 per cent to 2.5 per cent.
“We expect MTI to upgrade full year GDP growth to 3.0 per cent to 3.5 per cent (from the current 2 per cent to 3 per cent) in mid-November when the finalised third quarter GDP is released, as GDP growth is already averaging 3.3 per cent in the first three quarters,” Mr Chua and Ms Lee said.
The construction sector, whose performance has been in the doldrums, is likely to rebound next year, as private sector works recover on resurgent property sales, the economists added.
Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said the bank’s outlook remains that full-year GDP growth could potentially breach 3 per cent — higher than official projections of “upper half of the 2 per cent to 3 per cent forecast range”.
“Next year’s growth could be in a 2 per cent to 4 per cent range, supported by broader engines of growth apart from electronics and productivity gains, even as the global economic recovery matures,” she said.
In a separate statement on Friday, the Monetary Authority of Singapore (MAS), in line with expectations, maintained its current neutral appreciation stance for the Singapore dollar nominal effective exchange rate (S$NEER).
Looking ahead, MAS said: “The Singapore economy is likely to expand at a steady, but slightly slower, pace in 2018 compared to 2017.”