Singapore's economic growth rate fastest since 2011
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Singapore's prospects for the year are looking brighter after the government confirmed yesterday that the economy grew at its fastest rate since 2011.
For the three months ended June 30, gross domestic product (GDP) – a key measure of economic activity – expanded 3.8 per cent from a year earlier.
Economists had in fact been tipping second-quarter GDP growth to come in below the advance estimate of 3.7 per cent, after weaker manufacturing numbers in June.
Growth was an even stronger 15.5 per cent when compared with the first quarter this year – again the highest since 2011.
The healthier outlook prompted the Ministry of Trade and Industry (MTI) to upgrade its forecast for the rest of the year to between 2.5 per cent and 3.5 per cent, up from the earlier 1 per cent to 3 per cent.
The MTI said the economy is expected to keep gaining momentum in the second half of the year after a shaky first quarter, when growth was a mere 0.2 per cent.
But exports turned in a weak showing in the same three months ended June 30, falling 4.9 per cent on weaker shipments of electronics and non-electronics goods.
This led trade agency IE Singapore to cut its forecast for export growth this year.
It now expects exports to be flat or inch up 1 per cent this year, down from a previous estimate of 2 per cent to 4-per-cent growth.
Still, this would mean an improved export performance in the second half of this year, given that exports fell 8.8 per cent in the first six months.
In the second half of the year, the government expects global economic growth to improve, especially in the United States and Japan.
Sectors relying on overseas markets, such as manufacturing and transportation and storage, are expected to give the economy a boost over the rest of the year.
Locally focused sectors such as construction and business services are also likely to remain resilient, said MTI permanent secretary Ow Foong Pheng.
The pickup in second-quarter growth was led by the service sector, which rose 5.5 per cent year on year, boosted mainly by jumps in finance and insurance as well as wholesale and retail trade.
The manufacturing sector grew 0.2 per cent over the same period last year, reversing a 6.7 per cent decline in the previous quarter, while construction climbed 5.1 per cent in the quarter.
Bank of America Merrill Lynch economist Chua Hak Bin said Singapore stands out in the region among countries such as Thailand and Indonesia that have downgraded growth.
The stronger growth from the service sector more than offset the relative weakness in manufacturing and exports, he said.
Still, MTI warned that some risks to growth remain.
China’s economic restructuring efforts might result in a sharp slowdown in growth there. It is unclear if markets will adjust in an orderly fashion to a tapering of the US Federal Reserve’s huge stimulus programme, said Ow.
Economists are also wary. Barclays’ Joey Chew said domestic restructuring may prevent Singapore from fully benefiting from an upswing in global growth, while Credit Suisse’s Michael Wan said the recent surge in financial services is unlikely to be sustained.
