SINGAPORE, Jan 2 — Singapore’s economy shrank for the first time in five quarters after its manufacturing and services industries weakened, a contraction that may be short-lived as the global recovery strengthens.
Gross domestic product fell an annualised 2.7 per cent in the three months to December 31 from the previous quarter, when it expanded a revised 2.2 per cent, the trade ministry said in a statement today. The median of 11 estimates in a Bloomberg News survey was for a 1.3 per cent contraction.
Singapore’s economy is set to benefit this year from recoveries in the US and Europe, even as companies in the city-state grapple with rising costs and curbs on cheap foreign labour. The island’s trade promotion agency said in November exports would rebound in 2014 after contracting last year, easing pressure on the central bank to allow the currency to weaken to support overseas shipments.
“External demand will be improving,” Glenn Maguire, a Singapore-based economist at Australia & New Zealand Banking Group Ltd, said before the report. “That we can have the US, Japan and Europe all expanding and growing positively in 2014 suggests that Asia, not just Singapore, should be seeing a fairly firm production and export outlook.”
The Singapore dollar was little changed against its US counterpart at S$1.2642 as of 7:50am local time. The currency weakened more than 3 per cent last year even as the central bank said it would maintain a modest and gradual appreciation to curb inflation pressures. The depreciation was the biggest annually since 2001, according to data compiled by Bloomberg.
Global stabilisation
GDP grew 4.4 per cent in the three months through December from a year earlier, compared with a median survey estimate of 4.8 per cent.
The economy expanded 3.7 per cent in 2013, accelerating from a 1.3 per cent pace the previous year. Prime Minister Lee Hsien Loong on December 31 reiterated a forecast for growth of 2 per cent to 4 per cent in 2014.
“The European and American economies are stabilising,” Lee said in his New Year message. “Asian prospects are still positive, but there are problems and tensions,” he said, citing regional geopolitical disputes.
Emerging Asian economies will probably weather the impact of reduced US monetary stimulus, Asian Development Bank president Takehiko Nakao said in an interview on December 26, predicting growth of about 6 per cent in 2014.
No stimulus
The Monetary Authority of Singapore, which uses the island’s dollar to manage inflation, said in October it would maintain a modest and gradual appreciation of the currency. It resisted providing stimulus as labour shortages and record home prices fuelled consumer price gains. The central bank forecasts inflation to be 2 per cent to 3 per cent in 2014.
“The MAS will not do much to facilitate growth, it will rather err on the side of price stability,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. However, “there’s no compelling need for them to tighten just yet”, he said.
Singapore’s manufacturing fell 4 per cent last quarter from the previous three months, the trade ministry said. The services industry shrank 1.7 per cent in the same period, while construction contracted 6.9 per cent.
The figures released today were computed largely from data for October and November and may be revised. — Bloomberg
