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Singapore economy grew 2.1% in 2015, beating expectations

The Government had forecast full-year GDP growth of "close to 2 per cent", while private sector economists had expected growth to come in at 1.9 per cent.

SINGAPORE: The economy expanded by 2.1 per cent in 2015, in line with the Government’s official growth forecast and beating analysts' expectations, the Ministry of Trade and Industry (MTI) announced on Monday (Jan 4), based on advance estimates.

The Government had forecast full-year GDP growth of "close to 2 per cent", while private sector economists had expected growth to come in at 1.9 per cent, according to the latest quarterly poll by the Monetary Authority of Singapore in December 2015.

In the fourth quarter of 2015, the economy expanded by 2 per cent on a year-on-year basis, slightly faster than the 1.8 per cent growth in the previous quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, GDP grew by 5.7 per cent in the fourth quarter, up sharply from the 1.7 per cent growth in the preceding quarter.

DBS senior economist Irvin Seah noted that despite beating expectations, overall GDP growth was at its slowest in six years. Risks also remain with the potential capital flight that could result from further US interest rate hikes and fears of further deceleration in the Chinese economy, he said.

"Growth outlook in the next six to nine months will remain tepid before an improvement in the later part of 2016 can be expected. This should bring overall GDP growth for 2016 to 2.1 per cent," Mr Seah said.

According to economists, the better-than-expected numbers, however, do not detract from the underlying macroeconomic environment, which they said is "fluid" and "brittle", due to both structural and cyclical headwinds. 

ANZ Research economist Weiwen Ng said: "In the first half, what we can see is US and China struggling to gain a firmer economic footing, emerging economies struggling to adjust to this new era of interest rate normalisation by the Fed.

"In the second half, we are cautiously optimistic that the global economy will be on a firmer footing, and that could lend impetus to Singapore's growth going forward."

SECTOR-BY-SECTOR PERFORMANCE

The manufacturing sector contracted by 6 per cent in the fourth quarter, extending the 5.9 per cent decline in the previous quarter. The sector was primarily weighed down by a decline in the output of the electronics, transport engineering and precision engineering clusters, MTI said. On a quarter-on-quarter basis, the sector contracted 3.1 per cent, following the 3.5 per cent contraction in the previous quarter.

The sector remains "the weakest link" for Singapore's economy, Mr Seah said. "Both cyclical and structural challenges are dampening the growth prospects of this sector. External competition, rising business costs and weak external demand were key challenges facing the manufacturing sector for the past years."

The outlook for the manufacturing sector is expected to remain "dicey" judging from the conditions in the external environment, he added.

The construction sector expanded by 2.2 per cent, up from the 1.1 per cent growth recorded in the previous quarter, with growth supported by a pick-up in public sector construction activities, the ministry said. On a quarter-on-quarter basis, the sector expanded by 7 per cent, a reversal from the 4.9 per cent contraction in the preceding quarter.

The services producing industries posted year-on-year growth of 3.2 per cent in the fourth quarter, easing slightly from the 3.4 per cent growth in the previous quarter. Growth was supported mainly by the wholesale and retail trade, and finance and insurance sectors. On a quarter-on-quarter basis, the services producing industries expanded 6.5 per cent, an improvement from the 2.9 per cent expansion in the previous quarter.

According to Mr Seah, the services sector accounts for about two-thirds of Singapore's economy.

"While this sector is known to be a resilient and stable engine of growth for Singapore, performance of the sector going forward will continue to be affected by the existing domestic manpower crunch and drag from the manufacturing sector," he said.

Preliminary GDP estimates for the fourth quarter and the whole of 2015, including performance by sectors, sources of growth, inflation, employment and productivity, will be released in February, MTI said.

For 2016, economists said full-year GDP growth will likely remain around 2 per cent, with risks skewed to the downside.