Singapore's GDP grows 1.8% on back of strong Q4

SINGAPORE — A strong fourth-quarter performance helped the Singapore economy grow 1.8 per cent for the whole of last year, beating the official forecast of between 1 and 1.5 per cent, advance estimates from the Ministry of Trade and Industry (MTI) showed on Tuesday (Jan 3).
 
Nevertheless, this marks the weakest economic growth experienced by the Republic since 2009, when the global financial crisis shrank economic output by 0.6 per cent. 

Experts also stressed that the economy is not out of the woods, given the uncertain outlook on global trade in the next 12 months. 

In the last three months of 2016, the economy grew by 9.1 per cent on a seasonally-adjusted annualised basis, reversing a 1.9 per cent contraction in the third quarter. 

The growth was driven by manufacturing and services industries. Year-on-year, gross domestic product (GDP) for the fourth quarter expanded by 1.8 per cent.

Economists in a Reuters poll had expected GDP for the fourth quarter to grow 3.7 per cent on a seasonally adjusted annualised basis, and 0.6 per cent compared to a year ago.

The manufacturing sector grew by 6.5 per cent in the fourth quarter year-on-year, compared to 1.7 per cent in the previous quarter. “Growth was primarily driven by the electronics and biomedical manufacturing clusters, even as the transport engineering and general manufacturing clusters continued to contract,” MTI said. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector grew by 14.6 per cent, a “sharp turnaround” from the 8.1 per cent contraction in the third quarter, MTI noted.
 
The services sector also bounced back strongly — posting growth of 9.4 per cent in October to December on a quarter-on-quarter basis, compared to a 0.4 per cent contraction in the third quarter. Year on year, the sector grew 0.6 per cent in the fourth quarter, compared to 0.3 per cent in the previous quarter. 

However, the construction sector continued to shrink for the second consecutive quarter — contracting by 2.8 per cent in the fourth quarter, compared to the same period in 2015. It contracted by 0.2 per cent in the previous quarter, following several quarters of growth. MTI said the contraction was largely due to the decline in private sector construction activities.

In his New Year Message on Saturday, Prime Minister Lee Hsien Loong said the economy was expected to grow by more than 1 per cent. While this was less than what the Government had hoped for, Singapore is “not doing badly” considering the global economic uncertainties, he said. MTI has forecast Singapore’s economy to grow between 1 and 3 per cent this year. 

Recent surveys have found that companies - both large and small - were pessimistic about the outlook in the coming months. 

Economists reiterated that the risk of rising protectionism around the world, uncertainty over the impact of the Donald Trump administration in the United States, and a slowing China economy will weigh on the Republic’s economic performance this year. Citing these factors, Ms Selena Ling, head of treasury research & strategy at OCBC Bank, said she expects GDP to grow between 1 and 2 per cent this year - in line with predictions by UOB, Credit Suisse, and ANZ bank. Still, “the tide is gradually turning for 2017, with the long-awaited domestic manufacturing recovery finally taking root”, Ms Ling said.

Credit Suisse economist Michael Wan added: “President-elect Trump’s policies will likely have a negative impact on Singapore’s economy over the course of 2017, through higher interest rates raising debt servicing costs of both corporates and households, together with the potential indirect negative impact of trade protectionist measures.”