SINGAPORE: The Singapore economy grew by 3.2 per cent last year, a notch below initial estimates of 3.3 per cent and a moderation from 3.9 per cent in 2017, data from the Ministry of Trade and Industry (MTI) showed on Friday (Feb 15).
Growth is expected to slow for the year ahead, with MTI maintaining its forecast range of 1.5 per cent to 3.5 per cent. Gross domestic product is set to come in slightly below the mid-point of the range.
For the final three months of 2018, the economy expanded by 1.9 per cent from a year earlier. This compared with the 2.4 per cent rise in the third quarter and the Government’s earlier estimate of 2.2 per cent.
On a quarter-on-quarter seasonally adjusted basis, GDP grew by 1.4 per cent in the fourth quarter, unchanged from the previous three months but slightly below the 1.6 per cent initially expected.
In 2018, manufacturing remained as the key growth driver by expanding 7.2 per cent, primarily supported by the electronics, transport engineering and biomedical manufacturing clusters. This, however, marked a slowdown from the 10.4 per cent growth in 2017.
The services sector, which accounts for two-thirds of the economy, grew by 3 per cent, slightly slower than the 3.2 per cent growth in 2017. Growth was mainly supported by the finance and insurance, business services and wholesale and retail trade sectors.
The construction sector shrank by 3.4 per cent last year – a more modest pace of decline compared to the 10.2 per cent contraction in 2017 – as it continues to be weighed down by a decline in public sector construction works, though private sector construction works rose marginally.
INCREASING GLOBAL UNCERTAINTIES
In its assessment of 2019’s outlook, MTI said growth in most of the key advanced and regional economies is expected to moderate.
Uncertainties and downside risks in the global economy have also increased since three months ago.
For one, there remains the risk of a further escalation in trade conflicts between the US and its key trading partners, which could trigger a sharp fall in global business and consumer confidence. If this happens, global investment and consumption spending would decline, with an adverse impact on global economic growth.
A sharper-than-expected slowdown of the Chinese economy could also adversely affect the region’s growth due to falling import demand from China.
In addition, there is the risk of a “no-deal” Brexit between the UK and the European Union when it comes to the former’s withdrawal.
Uncertainties related to Brexit has thus far resulted in "limited" direct impact on Singapore, said MTI permanent secretary Loh Khum Yean, who stressed that the UK remains an important trading and economic partner of Singapore.
“Depending on how negotiations and arrangements turn out, if it leads to uncertainty and impact on consumer and investment sentiment, there could be an impact on not just the UK and EU, but also other trading partners of Singapore,” he told reporters at a briefing.
READ: No-deal Brexit 'could cost 600,000 jobs worldwide': Study
Given these heightened uncertainties and risks in the global economy, there has been a rise in volatility in global financial markets.
“Should the downside risks materialise, financial market volatility could spike and adversely affect investor sentiments, thereby exacerbating the negative effects on global growth,” MTI said in its media release.
“Against this external backdrop, the pace of growth in the Singapore economy is expected to slow in 2019 as compared to 2018."
The manufacturing sector, in particular, could see a “significant moderation in growth" following two years of rapid expansion as global demand for semiconductors and related equipment eases.
Cooling growth in world economies could also weigh on outward-facing services sectors, MTI said.