SINGAPORE: The Singapore economy grew more than expected in the third quarter, with gross domestic product (GDP) coming in at 1.1 per cent compared to a year ago, according to the Ministry of Trade and Industry (MTI) on Thursday (Nov 24).
The final year-on-year GDP figure for the July to September period was higher than the advance reading of 0.6 per cent, and slightly exceeded a forecast of 1 per cent by 17 economists in a Reuters survey.
But on a quarter-on-quarter, seasonally adjusted annualised basis, the economy shrank 2 per cent, coming in better than advance estimates of an unexpectedly sharp 4.1 per cent contraction. Economists surveyed by Reuters had expected Singapore’s third-quarter GDP growth to be down 2.5 per cent from the previous three months.
However, compared to the second quarter, Thursday’s GDP numbers painted a slowing picture of Singapore’s economy, which had managed year-on-year growth of 2 per cent and quarter-on-quarter expansion of 0.1 per cent during the April to June period.
MTI said improvement in the manufacturing sector contributed to the upward revision in the third-quarter GDP figures, but this was offset by a weak performance in business services, as well as the wholesale and retail trade sectors.
Sector breakdowns showed the business services sector expanded by 0.2 per cent year-on-year, slower than the 0.7 per cent growth in the second quarter. On a quarter-on-quarter basis, it contracted 0.1 per cent, easing from the decline of 0.7 per cent in the previous three months.
The wholesale and retail trade sector shrank 1.5 per cent year-on-year, in contrast to the 0.9 per cent growth in the second quarter. It slumped 2.7 per cent on a quarter-on-quarter seasonally-adjusted annualised basis, reversing the 0.1 per cent expansion in the second quarter.
On the other hand, the manufacturing sector grew by 1.3 per cent compared to the same period a year ago, propped up by the electronics and precision engineering clusters. However, the sector shrank 9.1 per cent quarter-on-quarter, a stark reversal of 2.1 per cent growth in the second quarter.
GDP GROWTH TO REMAIN "MODEST": MTI
Against this backdrop, MTI narrowed its full-year GDP forecast to between 1 and 1.5 per cent for 2016, compared with an earlier forecast of 1 and 2 per cent.
The decision to further trim its 2016 growth forecast stems from the assessment of external events, domestic conditions as well as third-quarter GDP data, said MTI Permanent Secretary Loh Khum Yean in response to Channel NewsAsia's query.
"Global economic conditions have remained sluggish, with full-year growth likely to come in marginally weaker than in 2015," added Mr Loh. He noted that the local economy grew at a slower pace of 1.7 per cent in the first three quarters of 2016, compared to 2.1 per cent over the same period a year ago.
GDP growth for the rest of the year is expected to remain “modest”, the MTI said.
"Sectors such as electronics, information and communications, and other services industries are likely to continue to support growth, while the wholesale trade, and finance and insurance sectors could continue to face external headwinds," the ministry said in its report.
When asked about the likelihood of a technical recession, Mr Loh said the economy "should avoid" another quarter-on-quarter contraction in the last three months of the year.
Growth in the final quarter will likely be "modest" with support coming from electronics, IT and other services industries, Mr Loh added.
Employment growth in the near term is expected to be weak, MTI added, given weak conditions in the external environment.
BREXIT, CHINA DEBT DEFAULTS ADD TO UNCERTAINTIES
For 2017, Singapore's economy is expected to grow between 1 and 3 per cent.
But even as global growth is expected to pick up slightly, downside risks such as Brexit and risk of debt defaults in China remain, MTI said.
In addition, political risks and uncertainties have risen, and could in turn lead to greater economic uncertainties, MTI added. In particular, an increasing backlash against globalisation could further dampen global trade which is already weak, while economic uncertainties could negatively affect business and consumer confidence, the report said.
Against this backdrop, the growth outlook for the Singapore economy will remain modest in 2017, MTI said.
SINGAPORE TO CONTINUE WORKING ON TPP
On the international front, US President-elect Donald Trump's protectionist stance has stirred concerns of how that could affect global trade, and in turn weigh on Singapore's small and open economy.
Given that the US is one of Singapore's top trading partners and an important source of foreign direct investment (FDI), the trajectory of the world's biggest economy and how it manages its trade relations will affect its partners around the world, Mr Loh said. However, it remains "too early to speculate on the impact of the new administration" which will "depend on the actual policies that the new presidency will adopt", he added.
The President-elect said earlier this week that he would move to pull the US out of the Trans-Pacific Partnership (TPP) trade deal the day he takes office.
Regarding Singapore's stance on the TPP, Mr Loh said: "The TPP leaders met recently at APEC and they feel that the fundamental rationale of the TPP has not changed.
"While we respect the new position of the new US administration, the other parties are going to continue their efforts to ratify the TPP and we are also committed to working with the other TPP partners to bring this process forward," he said.