SINGAPORE: The Singapore economy grew 2.6 per cent year-on-year in the third quarter, slowing down from the 4.1 per cent growth in the previous three months, advance estimates from the Ministry of Trade and Industry (MTI) showed on Friday (Oct 12).
The ministry’s estimate was, however, above those of private sector economists polled in the Monetary Authority of Singapore’s (MAS) recent quarterly survey. The survey of professional forecasters released last month estimated Singapore’s third-quarter gross domestic product (GDP) to be 2.1 per cent.
On a quarter-on-quarter seasonally-adjusted annualised basis, GDP growth expanded 4.7 per cent, picking up pace from the previous quarter’s 1.2 per cent.
The manufacturing sector remained the key driver of the economy but growth slowed to 4.5 per cent year-on-year in the July to September period, down from the 10.6 per cent growth in the previous quarter.
Growth was supported mainly by output expansion in the electronics, biomedical manufacturing and transport engineering clusters.
On the other hand, services growth held steady at 2.9 per cent from a year ago, with support largely coming from the finance and insurance, business services, as well as wholesale and retail trade sectors.
Construction continued to underperform with a contraction of 3.1 per cent year-on-year, extending the previous quarter’s 4.2 per cent decline, on the back of weakness in public sector construction activities.
The advance GDP estimates are computed largely from data in the first two months of the quarter - in this case, July and August. They are intended as an early indication of GDP growth in the quarter, and are subject to revision when more comprehensive data become available, said MTI.
MTI will release the third-quarter Economic Survey of Singapore in November, which will include performance by sectors, sources of growth, inflation, employment and productivity.
ECONOMISTS SANGUINE ON GROWTH OUTLOOK
Economists said the slowdown in the third-quarter growth estimate is in line with expectations amid a tapering of activity in the manufacturing sector following last year’s growth spurt.
In fact, broadening growth in the services sector, which makes up two-thirds of the economy, may help to fill in the gap for the rest of 2018.
“The fact is, manufacturing flattered by semi-conductor boom was unsustainable from the outset as the global demand cycle passes prime and inventory re-stocking peters out. This seemingly sharp deceleration in manufacturing is but normalisation,” said Mr Vishnu Varathan, head of economics and strategy for Mizuho Bank.
“The upshot is that while growth is set to inevitably ease as the exports-led spurt fades, underlying momentum and make-up remain relatively resilient, barring a major meltdown from global trade or financial shocks that is,” he added.
Echoing that, OCBC Bank’s head of treasury research and strategy Selena Ling said she expects a “slower but steady growth trajectory” ahead as the services sector looks set to become a stronger growth engine this year.
With that, Ms Ling has upgraded her full-year growth forecast for the Singapore economy to 3.3 per cent, from 3 per cent, even as she expects GDP growth to ease further to 2 per cent in the fourth quarter.
Referring to the central bank's decision to tighten monetary policy on Friday, she added: “The policy confidence to tighten monetary policy again suggests that the maturing of the global electronics cycle and the expected waning contribution of manufacturing to growth, as well as the US-China trade war spillovers and uncertainties have largely been factored in and have not precipitated a shift in their growth parameters for either 2018 or 2019.”
The Monetary Authority of Singapore said in its latest semi-annual policy statement that it will "slightly” increase the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, while flagging steady growth and higher inflation expectations.
Nevertheless, economists cautioned of lingering risks into 2019.
For instance, ongoing trade friction between the world’s two largest economies could “result in an abrupt buckle in economic activity” even though it “remains frustratingly hard to predict or quantify”, said Mr Varathan, who expects the local economy to see full-year GDP growth of just below 3 per cent next year.