Singapore’s final Q3 GDP in for upward revision: Economists

Singapore’s final Q3 GDP in for upward revision: Economists

Economists expect Singapore's economy to have grown between 4.7 to 5.1 per cent in the third quarter, faster than the preliminary estimate of 4.6 per cent and marking the country’s strongest growth in more than three years.

People walking along the pier overlooking the skyline of Singapore's financial district
People walking along the pier overlooking the skyline of Singapore's financial district. (File photo: AFP/Roslan Rahman)

SINGAPORE: For the third quarter, Singapore's economy likely grew at a faster pace than what the advanced gross domestic product (GDP) figure suggested – which was already the strongest in more than three years – according to private sector economists.

The Ministry of Trade and Industry (MTI) is set to release the final reading of GDP growth for the July to September quarter on Nov 23, which will include detailed information on sectoral performance, sources of growth, inflation, employment and productivity.

Economists that Channel NewsAsia spoke to have estimates ranging from 4.7 per cent to 5.1 per cent – all above the advanced GDP figure of 4.6 per cent and well up from the second quarter’s 2.9 per cent growth.

If these predictions come to pass, it will mark the economy’s fastest growth pace in more than three years, with the most bullish forecast being the strongest growth since the third quarter of 2013.

One “reliable indicator” is better-then-expected factory output for the third quarter, which expanded 18.5 per cent year-on year compared to the advanced estimate of 15.5 per cent, said Nomura economist Brian Tan.

“Assuming that we don’t get big downward revisions in construction and services, the outperformance of industrial production is a reliable indicator that third-quarter GDP will be revised upwards,” said Mr Tan, who is forecasting 4.9 per cent year-on-year growth.

There could also be a possible upward revision in services growth amid “a broadening-out in growth impetus across the economy”, noted DBS economist Irvin Seah who cited improvements in trade-related services and a pick-up in financial activities of late.

Mr Seah expects the July-September period to be the “strongest quarter” this year with year-on-year growth of 5.1 per cent. This will likely prompt MTI to raise its full-year growth forecast range on Thursday to 3 to 3.5 per cent, from its current projections of “upper half of 2 to 3 per cent”.

“Even after factoring in a technical payback in growth momentum in the fourth quarter, but barring any significant downward revision in the growth figures for the past quarters, the economy is now expected to expand 3.2 per cent in 2017, up from our long-held forecast of 2.8 per cent,” he said.


Other economists have also upgraded their 2017 growth forecasts for the Singapore economy to more than 3 per cent. However, most cautioned of a slowdown over the longer term as the growth spurt in manufacturing becomes unsustainable on the back of a tapering in global demand for electronics.

After all, the manufacturing sector, which accounts for one-fifth of the economy, has been the main driver behind economic growth over the past few quarters.

“A lot of the exaggerated upside from the external front came from the building up of inventory levels in electronics. With the inventory building almost done, electronics is due for a moderation,” said Mizuho Bank economist Vishnu Varathan.

“It is still looking pretty but the make-up is beginning to come off.”

UOB economist Francis Tan echoed that sentiment, noting that it’s too early to “pat ourselves on the back”.

The cyclical increase in demand has benefited not just Singapore but other Asian export-oriented economies as well, such as Malaysia and Thailand, he explained

“We are just one of the boats in the rising tide so we shouldn’t be too overly happy… That’s why I think Prime Minister Lee Hsien Loong repeated the fact that we still need to carry on with restructuring,” added Mr Tan, referring to Mr Lee’s statement on Sunday (Nov 19).

Speaking at the People’s Action Party's (PAP) convention, Mr Lee had said that the Government will have to press on with plans to restructure the economy despite the possibility of Singapore’s economic growth exceeding 3 per cent in 2017.

For 2018, economists generally expect a moderation in the city-state's GDP growth.

“It’s likely that we won’t have the one-off boost that we saw this year as the story for next year is a bit of an export slowdown. But I think the composition of growth will become more balance as private consumption should get better,” said Credit Suisse economist Michael Wan, who expects economic growth for 2017 to be at 3.4 per cent before slowing to 3 per cent next year.

In its macroeconomic review released last month, the Monetary Authority of Singapore (MAS) said that it expects Singapore’s economic growth to remain firm in 2018 though expansion could moderate slightly from this year.

Source: CNA/sk