Govt cuts S'pore growth forecast to 1-2% for 2016
THE weakening global economy is expected to weigh on Singapore's growth in the second half of the year, prompting the Government to trim its growth forecast for this year.
The economy is now projected to expand by 1 per cent to 2 per cent in what could be the slowest year since the global financial crisis, when the economy shrank 2 per cent in 2009.
This revised forecast is narrower than the earlier 1 per cent to 3 per cent projection, the Trade and Industry Ministry (MTI) said yesterday, laying out a sombre reading of prospects for the rest of the year.
It cited additional risks to growth, especially Britain's June vote to leave the European Union.
MTI permanent secretary Loh Khum Yean said Brexit "has dampened and added uncertainties to the global growth outlook", which could see weaker growth in key economies except the United States.
The ministry also flagged the risk of a spike in China debt defaults, which could spark tighter financial conditions, and a potential sharper slowdown in China's growth.
In the second quarter, Singapore's gross domestic product (GDP) - a key gauge of output - grew 2.1 per cent compared with the same period last year, MTI said.
But the economy grew just 0.3 per cent in the April to June period when compared with the first three months of the year.
Manufacturing - one-fifth of the economy - reversed from a 0.5 per cent decline in the first quarter, to 1.1 per cent second- quarter growth - largely lifted by expansion in the electronics and biomedical clusters.
Still, MTI cautioned that this improvement may not be sustained.
"The outlook remains challenging for firms, which will have to seek more innovative business models and learn how to tap the Asean market for a cost-efficient way to do production," Singapore Manufacturing Federation president Douglas Foo said.
Most sectors turned in weaker year-on-year growth in the second quarter compared with the first.
The services sector grew 1.4 per cent in the second quarter, down from the 1.7 per cent growth in the first, while growth in the construction sector slowed to 3.3 per cent, from 4 per cent in the first quarter.
Economists expect growth in the coming quarters to stay muted given macroeconomic uncertainties.
OCBC head of treasury research and strategy Selena Ling said: "The third-quarter growth may see a bit of a knockdown, partly due to the post-Brexit panic... But for the full year, we are nowhere near a recession because in the first half, GDP growth was already at 2.1 per cent."
She expects Singapore's economy to grow by 1.8 per cent this year while DBS Bank economist Irvin Seah puts it at 1.5 per cent.
On the labour market front, overall unemployment rate rose from 1.9 per cent in March this year to 2.1 per cent in June.