SINGAPORE, Nov 24 — The full year forecast for Singapore’s economic growth this year was narrowed to 1 to 1.5 per cent, from the earlier 1 to 2 per cent range, the Ministry of Trade and Industry (MTI) said today.
The forecast was revised after final data showed that the economy contracted by 2 per cent in the third quarter, compared to the previous quarter on seasonally adjusted annualised basis. Despite the contraction, the performance was better than expected, with improvements in the manufacturing sector.
The contraction was a reversal from the 0.1 per cent growth in the second quarter. Advance estimates released last month had showed that the economy shrunk by 4.1 per cent in July to September, compared to the second quarter. Economists in a Reuters poll had expected a 2.5-per-cent contraction in the third quarter.
Minister for Trade and Industry (Trade) Lim Hng Kiang had cautioned in Parliament last month that the economy may contract in some quarters and growth will likely be at the lower end of the previous official forecast range.
On a year-on-year basis, the Singapore economy grew by 1.1 per cent for the third quarter, moderating from the 2 per cent growth in the preceding quarter.
MTI said: “Global economic conditions have remained sluggish, with full-year growth for 2016 likely to come in marginally weaker than in 2015…Growth was weighed down primarily by the weak performance of the business services and wholesale & retail trade sectors.
“For the rest of the year, Singapore’s GDP growth is expected to remain modest. Sectors such as electronics, information & communications and “other services industries” are likely to continue to support growth, while the wholesale trade and finance & insurance sectors could continue to face external headwinds.”
For next year, MTI expects the Singapore economy to perform at a “modest pace”, growing at a forecast range of 1 to 3 per cent.
“Global growth is projected to pick up slightly in 2017. In particular, growth in the advanced and developing economies like the United States, Japan, NIEs and ASEAN is expected to improve, even as growth in the Eurozone and China moderates,” MTI said.
Compared to the second quarter, the manufacturing sector shrank by 9.1 per cent, reversing from the expansion of 2.1 per cent in the previous quarter. Year-on-year, the sector expanded by 1.3 per cent, compared to the 1.4-per-cent growth in the previous quarter, supported by the electronics and precision engineering clusters which had benefitted from an improvement in external demand for semiconductors and semiconductor equipment.
Services producing industries shrank 1.3 per cent for the July to September period, extending from the 0.9 per cent contraction the previous month. Year-on-year, the sector was flat for the third quarter, softening from the 1.2 per cent growth in the second quarter.
In a separate statement, IE Singapore downgraded the Republic’s non-oil domestic exports (NODX) annual projection to between -5.5 and -5 per cent, from the earlier forecast of between -4 and -3 per cent, due to the weaker-than-expected performance of electronic and non-electronic NODX for the third quarter.
NODX shrank by 5.4 per cent year-on-year for the third quarter, following the previous quarter’s 0.2 per cent decline, due to the decrease in exports of both electronic and non-electronic products.
This is the second time in less than four months that the official growth forecast has been revised. The economy was forecast to grow between 1 and 3 per cent at the start of the year. In August, the range was lowered to 1 to 2 per cent.
UOB economist Francis Tan said the “constant downward revision” of gross domestic product growth reflects not only the weak external demand that has bugged the economy since 2014, but also shows that “weakness had infiltrated into the domestic sectors too”, as shown by the poorer-than-expected third quarter performance in the services sector. “Today’s numbers further proves the point that although longer term support for businesses is important, more short term measures are required to help businesses at least survive this difficult period,” he said.
While the final third quarter data were better than the advance estimates, ANZ economist Ng Weiwen said the economic performance “does not detract from the fact that sequential growth still remains entrenched in negative territory and the economy still runs the risk of a technical recession in the fourth quarter”. “Even if the economy slips into a technical recession, the recession will be largely technical in nature in that the extent of contraction will be mild and more modest than during the decline during the global financial crisis in 2008 and 2009,” he said.
Technical recession is defined as two consecutive quarters of contraction. Last week, labour chief Chan Chun Sing noted that it was too early to tell whether such a scenario will happen, even though Singapore’s exports plunged 12 per cent in October year-on-year - the lowest in seven months. Mr Chan, who is also a Minister in the Prime Minister’s Office, said that businesses should focus on long-term fundamentals instead of short-term numbers.
At a press briefing, Permanent Secretary (Trade and Industry) Loh Khum Yean said MTI’s view is that the Singapore economy “should avoid a technical recession” in the fourth quarter. “We expect GDP growth in the fourth quarter to be modest, supported by sectors such as electronics, information and communications and other services industries,” he said. — Today
