SINGAPORE: Singapore’s economy clocked a quicker-than-expected 2.7 per cent growth in the first quarter of 2017 from a year earlier, helped largely by continued strength in the manufacturing sector, data from the Ministry of Trade and Industry (MTI) showed on Thursday (May 25).
The ministry also said it will maintain its gross domestic product (GDP) forecast for the year at 1 to 3 per cent, with growth likely to expand more than 2 per cent “barring the materialisation of downside risks”. Singapore’s trade reliant economy grew 2 per cent last year, propped up by a year-end turnaround in manufacturing activities.
While economic growth in the first three months of 2017 slowed from the 2.9 per cent expansion seen in the previous quarter, the year-on-year GDP figure still outperformed the Government’s earlier estimate of 2.5 per cent and was in line with a Reuters poll of economists.
On a quarter-on-quarter seasonally adjusted basis, the economy shrunk 1.3 per cent, a reversal of the strong 12.3 per cent rebound in the preceding quarter but better than the official advance estimate of a 1.9 per cent contraction. Economists polled by Reuters had expected GDP growth to contract 1 per cent in the first quarter.
Across sectors, the manufacturing industry remained the key driver of growth, with year-on-year expansion of 8 per cent. That was primarily driven by the electronics and precision engineering clusters, which expanded on the back of robust global demand for semiconductors and semiconductor manufacturing equipment, MTI said.
On a quarter-on-quarter basis, the manufacturing sector contracted by 1.5 per cent, pulling back from the 39.8 per cent expansion in the preceding quarter.
GLOBAL ECONOMIC OUTLOOK IMPROVED SLIGHTLY: MTI
In its report, MTI noted that the outlook for the global economy has brightened slightly since early-2017, thanks to an improvement in the growth prospects of advanced economies.
In particular, the US economy is projected to grow at a faster pace this year, supported by domestic demand.
Closer to home, China’s economic growth is projected to ease marginally but ongoing fiscal stimulus will likely provide support, MTI said. Growth among key ASEAN economies is also expected to pick up in 2017, helped by resilient domestic demand and the recovery in merchandise exports.
Overall, MTI expects global growth in 2017 to be higher than that in 2016 but uncertainties remain.
The key risks highlighted on Thursday include rising anti-globalisation sentiments, political risks and economic uncertainties in Europe and the US, as well as the possibility of tighter monetary conditions in China. Should there be a steeper-than-intended pullback in credit, investment spending and hence growth in China could slow down more sharply than expected, MTI said.
Against this external backdrop, trade-related sectors such as manufacturing and transportation and storage, will likely lend support to the Singapore economy in 2017.
In particular, growth in the electronics and precision engineering clusters is expected to be sustained for the rest of the year on the back of the strong recovery in global demand for semiconductors and semiconductor manufacturing equipment, MTI said. Likewise, the transportation and storage sector will also benefit from the projected improvement in global trade flows, it added.
Meanwhile, the information & communications sector, as well as the education, health and social services sectors, are expected to remain resilient.
However, MTI's permanent secretary Loh Khum Yean said the Government will be watching out for "a certain unevenness" in the performances of various sectors.
He was referring to sectors such as construction, which continued to lag. For the first quarter of 2017, the sector shrunk 1.4 per cent year-on-year, extending the 2.8 per cent decline in the previous quarter, due to persistent weakness in private sector construction works.
"We need to watch how these other sectors continue to perform over the coming months and we will do so before we consider whether to adjust the forecast range," he said.
With the 2017 GDP growth forecast remaining unchanged, a representative from the Monetary Authority of Singapore (MAS) said the central bank's decision in April to stand pat on its neutral policy stance of zero per cent appreciation of the S$NEER (Singapore dollar nominal effective exchange rate) remains appropriate.
Meanwhile, data from International Enterprise (IE) Singapore on Thursday showed non-oil domestic exports (NODX) expanded by 15.2 per cent year-on-year in the first quarter of 2017, extending the 2.7 per cent increase in the previous quarter, on increased shipments of both electronic and non-electronic products.