Growth for 2018 is expected to moderate but stay firm, with official estimates tipping it to be slightly above the middle of the forecast range of 1.5 to 3.5 per cent.
SINGAPORE: The Singapore economy grew 3.6 per cent last year, faster than initial estimates of 3.5 per cent, according to data released by the Ministry of Trade and Industry (MTI) on Wednesday (Feb 14).
That marks a pick-up from 2016’s 2.4 per cent growth, and marks the Republic’s fastest growth since 2013.
For the final three months of 2017, gross domestic product (GDP) expanded by 3.6 per cent from a year earlier, easing from the 5.5 per cent rise in the third quarter but quicker than the Government’s earlier estimate of 3.1 per cent growth for the fourth quarter.
On a quarter-on-quarter seasonally adjusted basis, the economy grew by 2.1 per cent in the fourth quarter. This compared with the 2.8 per cent initially expected and 11.2 per cent in the July to September period.
For 2017, the manufacturing sector was the standout performer despite seeing growth slowing down in the fourth quarter. The sector expanded by 10.1 per cent, accelerating from the 3.7 per cent growth in 2016. Growth largely driven by the electronics and precision engineering clusters, even as the biomedical manufacturing, transport engineering and general manufacturing clusters contracted.
Accounting for about two-thirds of the economy, the services sector quickened its pace of growth to 2.8 per cent, compared with the 1.4 per cent growth in 2016. Growth was mainly supported by the finance and insurance, wholesale and retail trade and transportation amd storage sectors, which expanded by 4.8 per cent, 2.3 per cent and 4.8 per cent respectively.
By contrast, the construction sector shrank by 8.4 per cent, a reversal of the 1.9 per cent growth in 2016. Output in the sector was primarily weighed down by the weakness in private sector construction works, which contracted by 29.1 per cent on the back of a decline in private residential and private industrial works.
2017 also saw a strong pick-up in productivity, in line with the cyclical upswing, said MTI’s permanent secretary Loh Khum Yean.
Overall labour productivity grew by 4.5 per cent last year, the highest recorded since the rebound year of 2010 and a significant improvement from the 1.8 per cent achieved in 2016.
2018 GROWTH TO MODERATE BUT REMAIN FIRM
For 2018, full-year growth is expected to moderate but remain firm, with official estimates expecting GDP to come in slightly above the middle of the forecast range of 1.5 to 3.5 per cent.
MTI said the outlook for global growth has improved slightly since last November, with the International Monetary Fund (IMF) upgrading its global growth forecast for 2018 to 3.9 per cent, partly on the back of higher growth expected in the US due to the recently approved tax reforms.
However, as compared to 2017, growth in most of Singapore’s key final demand markets, such as the Eurozone, Japan, and ASEAN-5, is projected to moderate or remain unchanged in 2018.
“On balance, the external demand outlook for Singapore is expected to be slightly weaker in 2018 as compared to 2017,” MTI said.
In addition, while global macroeconomic risks have receded to some extent since the end of 2017, there remain some downside risks that could weigh on the global economy if they come to pass.
Firstly, concerns over protectionist sentiments and in particular, the US administration’s trade policies remain.
Next, an upside surprise in inflation could cause monetary policy in the US to normalise faster than expected. This could in turn cause global financial conditions to tighten more than anticipated, and potentially lead to sharp corrections in financial markets.
“Should this occur, regional economies with elevated debt levels could be disproportionately affected, and there could be some pullback in investment and consumption growth in these economies,” MTI said.
Against this external backdrop, the pace of growth in the Singapore economy is expected to moderate in 2018 as compared to 2017 but remain firm, MTI added.
The manufacturing sector is likely to continue to expand and provide support to growth in the overall economy, with the electronics and precision engineering clusters projected to sustain a healthy, though more moderate, pace of growth this year on the back of robust global demand.
Externally-oriented services sectors such as finance and insurance, transportation and storage and wholesale trade are expected to benefit from firm external demand, although their pace of growth is also likely to ease in 2018.
Growth is expected to broaden to domestically-oriented services sectors like retail and food services on the back of an improvement in consumer sentiments amidst the on-going recovery in the labour market.
The information and communications and education, health and social services sectors are also expected to remain resilient.
However, the performance of the construction sector is likely to remain lacklustre in 2018 as the earlier weakness in construction demand, particularly from the private sector, continues to weigh on construction activities in the sector.
Apart from construction, the outlook for the marine & offshore engineering segment is also expected to remain challenging due to weak demand conditions faced by local yards and firms producing oilfield and gasfield equipment amidst the low oil price environment and excess capacity in the global offshore rig market.
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