SINGAPORE: The Singapore economy grew 1.3 per cent year-on year in the first quarter of 2019, according to advance estimates released by the Ministry of Trade and Industry (MTI) on Friday (Apr 12).
The official estimate marked a slowdown from 1.9 per cent in the previous quarter, and came in below the expectations of 1.4 per cent in a Bloomberg poll.
On a quarter-on-quarter seasonally adjusted annualised basis, gross domestic product (GDP) grew by 2 per cent, faster than the 1.4 per cent growth in the fourth quarter of last year.
Weighing down on overall growth was a contraction in the key manufacturing sector, which shrunk 1.9 per cent on a year-on-year basis in the first quarter on the back of output declines in the precision engineering and electronics clusters. This is a reversal from the 5.1 per cent growth in the previous quarter.
The first quarter contraction marked the sector’s worst year-on-year growth performance since the first quarter of 2016, said OCBC Treasury Research.
On a quarter-on-quarter seasonally-adjusted annualised basis, manufacturing contracted by 12 per cent, extending the 2.7 per cent decline in the preceding quarter.
The services producing industries grew by 2.1 per cent on a year-on-year basis in the first quarter, slightly higher than the 1.8 per cent growth in the fourth quarter of last year. Growth was primarily supported by the information & communications and business services sectors.
On a quarter-on-quarter seasonally-adjusted annualised basis, services grew by 4.8 per cent, faster than the 2.8 per cent growth in the previous quarter.
While services have held up thus far, it is not resistant to external headwinds, said Mizuho's head of economics and strategy Vishnu Varathan.
“This is but a reflection of Singapore's small and open economy deriving either directly or indirectly from trade and manufacturing-related services – a reminder that services accounting for two-thirds of the economy must not be conflated with trade insulation,” he wrote in a note.
“What's more, the property cooling measures dragging on related mortgage and real estate services activity has acted to dampen services activity overall.”
On the other hand, construction logged in its first quarter of positive growth following 10 consecutive quarters of decline.
It grew by 1.4 per cent on a year-on-year basis in the first quarter - a turnaround from the 1.0 per cent decline in the previous quarter.
“The recovery of the sector was supported by an improvement in private sector construction activities,” said MTI.
On a quarter-on-quarter seasonally-adjusted annualised basis, the sector grew of 7.8 per cent, extending the 5.1 per cent expansion in the preceding quarter.
“The construction sector is finally out of recession,” said DBS senior economist Irvin Seah.
“Although residential construction activities remain sluggish, impetus from a healthy pipeline of infrastructure projects is gradually taking effect. Expect better showing from this sector in the coming quarters.”
ECONOMISTS CUT FORECAST FOR 2019 GROWTH
With the first-quarter advance estimates showing a less rosy outlook, some economists have downgraded their full year growth forecasts for Singapore.
OCBC, for instance, is revising its 2019 GDP growth forecast to 1.8 per cent to 2 per cent, with headline and core inflation tipped at 0.5 per cent and 1.5 per cent year-on-year, respectively.
"This factors in the weaker-than-expected first quarter growth momentum and assumes a potentially soft second quarter as well," said the bank’s head of treasury research and strategy Selena Ling.
"Until we see a clear bottom and subsequent improvement in the China and global growth prospects, the overall picture for the Singapore economy remains cautious."
DBS is also cutting its full year GDP growth estimate to 2.6 per cent though Mr Seah reckons that the first quarter will likely be the weakest quarter for 2019.
“We believe the economy has reached the bottom of the current growth cycle,” he wrote. “We expect a steady pick-up in growth performance in the coming quarters, as economic outlook improves.”
This is due to a slew of policy stimulus from China and a stable monetary policy by global central banks, which will provide the uplift in global economic conditions.
“This should bring about a significantly stronger second half compared to the first quarter for Singapore. In short, this year will likely be back-loaded,” he said.
Also released on Friday morning, the Monetary Authority of Singapore said it would keep its exchange rate-based monetary policy unchanged amid easing growth.
Additional reporting by Tang See Kit.