- POSTED: 11 Oct 2013 21:34
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Economists are forecasting a contraction of 4.1 per cent in the Singapore economy for the third quarter due to lower factory output.
SINGAPORE: Economists are forecasting a contraction of 4.1 per cent in the Singapore economy for the third quarter, ahead of the release of official data.
The Ministry of Trade and Industry will release advance estimates for third quarter GDP growth on Monday.
Economists say Singapore's third quarter GDP is likely to contract due to lower factory output. They are forecasting a contraction of 4.1 per cent for the quarter, following a strong 15.5 per cent quarter-on-quarter growth in the second quarter.
DBS Bank senior economist Irvin Seah said: "Industrial production has been coming off the last few months. PMI numbers have been sliding downwards as well. Even NODX -- export performance -- has been deteriorating.
“So essentially all the key indicators are pointing to a contraction in the manufacturing sector... The manufacturing sector, which has been a key driver in the second quarter of the year, has now become a drag."
Economists say the services sector is the wildcard that could offset some of the slack from the manufacturing sector. But the outlook for services is unclear, given the slowdown seen in emerging economies.
This week, the International Monetary Fund cut global growth forecast, citing the worse-than-expected performance of key emerging market economies.
Barclays regional economist Joey Chew said: "So on the upside, we have the advanced economies generally doing better. In terms of global PMIs, we are now at the highest level since June 2011.
“But there are also downside risks. Some of the regional economies like Indonesia and Thailand are not doing as well, and that will affect our services economy.
“But I'll still say, given that the US has delayed tapering, that has provided some policy breathing room for some of the ASEAN economies to put in place some of the structural reforms that are necessary to make their economies more robust to capital flows volatility."
Amid the uncertain external outlook, economists say Singapore's domestic restructuring is also crimping growth.
Mr Seah said: "The tightening in inflow of foreign workers has led to a labour crunch. As a result, many companies are not able to fulfil some of the export orders, or are unable to take on more orders."
On a year-on-year basis, third quarter growth is expected to come in at 3.8 per cent.
The economy grew 0.2 per cent in the first quarter and 3.8 per cent in the second quarter.
Based on the latest MAS Survey of Professional Forecasters in September, economists are pencilling in GDP growth of 2.9 per cent for the full year. This is within the government's projection of 2.5 per cent to 3.5 per cent growth.