Nov 26, 2015

    MTI: S'pore's economy grew faster than estimated in Q3

    SINGAPORE'S economy grew much faster than initially estimated in the third quarter, thanks to a better-performing services industry, but the growth outlook for the year has softened amid sluggish global demand, according to data and forecast released by the Ministry of Trade and Industry (MTI) yesterday.

    The full-year forecast for 2015's gross domestic product (GDP) was revised to "close to 2.0 per cent" from 2.0 to 2.5 per cent previously.

    That means growth would be lower than last year's 2.9 per cent and the weakest since 2009, noted Reuters.

    The decline reflects the impact on Asia of slowing demand for its exports from major world economies such as the United States, China and Europe, Agence France-Presse pointed out.

    As for 2016, MTI forecast growth of 1.0 to 3.0.

    GDP rose an annualised 1.9 per cent in the third quarter from the prior quarter, MTI said yesterday, much better than its advance estimate issued last month of 0.1 per cent growth.

    In the second quarter, GDP contracted a revised 2.6 per cent quarter-on-quarter.

    The stronger revision is due to upwardly revised services sector activity, which accounts for about two thirds of Singapore's economic activity and grew 3.5 per cent, with retail and wholesale trade higher.

    While Singapore's industrial production fell for an eighth straight month in September, retail sales growth has been positive over the same period of time, noted Bloomberg.

    The GDP data showed that the manufacturing sector contracted 4.6 per cent in July to September from the previous quarter.

    Big-ticket manufacturing items, such as semiconductors, pharmaceuticals and oil rigs, have all performed weakly.

    "For the rest of the year, Singapore's GDP growth is expected to remain resilient amidst a challenging external environment," MTI said, adding that "sectors such as wholesale trade and finance and insurance are likely to continue to post modest growth, even as the manufacturing sector is expected to remain weak".

    One of the downside risks for 2016 is if China's economic rebalancing falters.

    This could shake Singapore's financial system and lead to a sharp fall in economic growth, said MTI.

    "With low commodity prices, the anticipated normalisation of US monetary conditions and volatility in the Chinese stock market, regional countries could face sudden and large capital outflows resulting in added pressures on their currencies and asset markets," it added.

    Singapore's consumer prices fell for a 12th straight month in October and core inflation, which excludes the cost of transport and accommodation, slowed to 0.3 per cent.

    While the Monetary Authority of Singapore (MAS) has avoided characterisations of slowing growth and falling inflation as a deflationary environment, recent data has put pressure on it to ease its exchange-rate policy further.

    The Singapore dollar's nominal effective exchange rate remains "comfortably" within the policy band, MAS deputy managing director Jacqueline Loh said at the briefing yesterday after the release of GDP data.