Bright spot in regional services trade despite weak economic growth
Transport services have contributed significantly to strong growth rates in Singapore's service sector in recent years, according to the Monetary Authority of Singapore. AFP file photo
SINGAPORE — The services trade segment is a silver lining for the Republic amid slower growth in the broader economy because of China’s drive towards consumer spending and continued expansion in the Association of South-east Asian Nations (ASEAN) economies.
In its twice-yearly Macroeconomic Review report issued on Wednesday (April 27), the Monetary Authority of Singapore (MAS) noted that the long-term outlook for regional services trade remains bright because of China driving growth in demand for imported services as it continues to rebalance its economy towards consumption.
“As much of China’s services sector remains underdeveloped, the country has been relying on imports to meet its increasing demand,” it said.
This switch in China’s footprint from global merchandise trade to services trade could provide significant opportunities for the region and for Singapore.
“Singapore’s exports of services to China have been growing at an average pace of 15.2 per cent per annum in 2012-2014, about 1.8 times faster than Singapore’s services exports to the world. In particular, transport services as well as financial and insurance services have contributed most significantly to the strong growth rates in recent years,” the MAS said.
UOB economist Francis Tan noted that other than China, ASEAN is another source for the export of Singapore’s services because of its large population — almost half the size of China — giving another boost to this segment.
“Generally, we are in a strong comparative advantage for this segment, not only to China, but also for the export of services to ASEAN countries as well. For demographics, the size of people entering into the workforce in ASEAN nations is increasing ... also as the rising middle-income (group) grows, it adds on to the demand for imported services,” Mr Tan said.
But most other sectors will be facing challenging times going forward.
The central bank said the deterioration in the external environment will have a dampening effect on the Republic, and “the Singapore economy will likely see a protracted period of modest growth in the quarters ahead”.
External-oriented industries such as trade-related industries will be impacted, while domestically oriented industries would face lingering pockets of weakness, stemming from a muted outlook for the domestic retail and real-estate sectors.
In all these conditions, the MAS has maintained its gross domestic product growth forecast for this year at 1-3 per cent.
