- POSTED: 12 Aug 2014 08:05
- UPDATED: 12 Aug 2014 22:19
The Government has narrowed its GDP growth forecast for the year to between 2.5 and 3.5 per cent, the Ministry of Trade and Industry (MTI) says.
SINGAPORE: The Republic’s economy expanded by a faster-than-expected 2.4 per cent in the second quarter of this year from a year ago, amid a slowdown across all sectors, the Ministry of Trade and Industry (MTI) said on Tuesday (Aug 12).
The growth during the April-June period was better than the advance estimate of 2.1 per cent announced last month, and was in line with the 2.4 per cent median estimate of economists polled by Reuters.
On a seasonally adjusted and annualized rate, Singapore’s gross domestic product expanded by 0.1 per cent – performing better than the earlier estimate of a 0.8 per cent quarter-on-quarter contraction.
Output from the manufacturing sector rose by 1.5 per cent compared with the same quarter last year, a sharp slowdown from the 9.9 per cent expansion in the preceding quarter. The deceleration in growth was largely due to a contraction in electronics output and slower growth in transport engineering output, MTI said.
However, some economists say they are not overly-concerned. They say the decline was likely due to a one-off factor in the electronics segment, and that recent statistics are pointing to improvement. The latest Purchasing Managers' Index reading for July showed the manufacturing sector expanding at its fastest rate in a year.
Mr Vishnu Varathan, a Senior Economist with Mizuho Bank, said: "Going forward, the momentum looks to be more positive than it is likely to surprise on the downside. We think that the manufacturing sector will continue to gain traction albeit with soft patches along the way. We're hoping that with the global recovery taking shape led by the US, there will be more IT renewals coming through and that could add some value to the manufacturing sector, particularly in the higher end semiconductors."
As for the construction sector, it grew at a slower pace of 4.4 per cent year-on-year in the second quarter, compared with the 6.4 per cent growth in the previous quarter. The slowdown was mainly due to a fall in private construction output, reflecting weaker private residential building works and a decline in private commercial and industrial building works.
Meanwhile, the financial and insurance sector grew 5.5 per cent year-on-year, largely similar to the 5.7 per cent growth in the first quarter, while the wholesale and retail trade sector expanded by 1.7 per cent, slower than the 3.8 per cent expansion in the previous quarter.
GROWTH FORECAST NARROWED
Prime Minister Lee Hsien Loong said in his National Day address last week the Singapore economy grew by 3.5 per cent in the first half of this year, and that the official growth forecast for 2014 has been narrowed to between 2.5 and 3.5 per cent, from the earlier projection of 2 to 4 per cent.
Looking ahead, MTI said externally-oriented sectors such as finance and insurance and wholesale trade are likely to support growth in the second half of the year, in tandem with the modest pick-up in the global economy.
"Domestically-oriented sectors such as business services and information and communications are also expected to remain resilient in the second half of 2014," it added.
MTI, however, said growth in some labour-intensive segments such as retail and food services may be weighed down by labour constraints.
That said, the ministry says Singapore's economy remains competitive and that restructuring efforts should continue. "Net firm formation is 8,800 in second quarter of 2014, which is higher than the average quarterly net firm formation in 2013, which stood at about 5,000-plus. EDB continues to be able to bring in investments. All these are indicators we think that point to over the long term and overall, we need to persist at restructuring," said MTI Permanent Secretary Ow Foong Pheng.
Beyond domestic restructuring constraints, some economists say the improving global outlook will help provide a lift to Singapore, despite some uncertainty in the horizon.
"In the second quarter, the US economy did register a rebound in growth, but if you average out the first and second quarter growth, the pace of growth is really sluggish. We've seen some slowdown in growth in the Eurozone. And finally, in China, although we've seen soft landing, the pace of growth this year will definitely be slower than in previous years," said Mr Irvin Seah, Senior Economist at DBS Bank.
Still, the latest Markit PMI numbers showed that global growth hit a 3.5-year high in July, with developed economies seeing the fastest expansion since 2007.