SINGAPORE: The Singapore economy grew 2.2 per cent on a year-on-year basis in the final three months of 2018, easing slightly from the previous quarter and missing economist predictions, according to advance estimates released by the Ministry of Trade and Industry on Wednesday (Jan 2).
The fourth-quarter flash estimate, which is computed largely from data gathered in the first two months of the quarter, was just a notch below market expectations of 2.3 per cent. It was also slightly slower than the growth of 2.3 per cent in the preceding quarter.
On a quarter-on-quarter seasonally adjusted annualised basis, Singapore’s gross domestic product expanded at a slower pace of 1.6 per cent, way below the median forecast of 3.2 per cent in a Reuters poll and moderating from 3.5 per cent in the third quarter.
The latest figures come two days after Prime Minister Lee Hsien Loong said in his New Year message that Singapore’s economy clocked steady growth of 3.3 per cent last year, close to 2017’s 3.6 per cent and above expectations.
GDP growth in 2019 is expected to be between 1.5 and 3.5 per cent, added Mr Lee, though he warned of major uncertainties in the global economy amid growing trade conflicts, nervous financial markets and signs of slowing growth.
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Manufacturing remained firmly in the driving seat for growth in the fourth quarter, picking up speed from last quarter's 3.7 per cent to expand 5.5 per cent on a year-on-year basis.
Growth was largely driven by robust output expansions in the biomedical manufacturing and electronics clusters, which more than offset the output decline in the precision engineering cluster.
The services industries, which make up two-thirds of the economy, grew 1.9 per cent over the same period from a year earlier, moderating from a growth of 2.6 per cent in the third quarter.
Construction remained a laggard by contracting 2.2 per cent on a year-on-year basis during the October to December period, extending the 2.5 per cent decline in the previous three months.
This was primarily due to weakness in public sector construction activities, MTI said.
While the local economy held steady in 2018 with the full-year GDP figure showing just a modest slowdown from the year before, economists have expressed caution on Singapore's outlook.
Describing the external economic environment as “fraught with uncertainties”, OCBC Bank’s head of treasury research and strategy Selena Ling is pencilling in GDP growth of 2.7 per cent for 2019.
These include lingering questions over the health of China’s economy, choppy financial markets, “somewhat wavering” business and consumer confidence, as well as tightening global financial conditions.
On the global trade front, uncertainties remain as to whether the 90-day truce between the United States and China can materialise into a lasting deal, she added.
Mr Edward Lee, chief economist for ASEAN and South Asia at Standard Chartered Bank, also expects Singapore’s economic growth to ease to about 2.6 per cent in the year ahead.
“Compared to how we started 2018, where we were coming off a good performance in the second half of 2017, the mood at the moment is certainly a more cautious one,” he told Channel NewsAsia.
For one, further slowdown can be expected in the key manufacturing sector amid slowing growth in major economies and more subdued global demand conditions. One indicator is China’s official manufacturing purchasing managers’ index (PMI), which contracted for the first time in more than two years in the month of December.
“The PMIs have always been a good leading indicator for (manufacturing),” he explained. “It has been slowing down in China … and this means that we can expect further slowdown in the sector.”
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Given that the risks are “tilted towards the downside”, the Monetary Authority of Singapore (MAS) may take a leaf from the US Federal Reserve’s book and “proceed cautiously” when it comes to monetary policy, according to ING chief economist Robert Carnell.
Echoing that, Mr Lee thinks the central bank could stand pat when it meets for its half-yearly policy meeting in April. The MAS has tightened monetary policy twice in 2018 to allow the Singapore dollar to strengthen a little faster.
He said: “Looking at where growth is going, the direction that risks are biased towards and how the Singdollar is still within the S$NEER (Singapore dollar nominal effective exchange rate) policy band, I think there is scope for MAS to keep things as it is in April.”