SINGAPORE – The Singapore economy grew 3.5 per cent in 2017 though the manufacturing-led growth spurt lost some steam in the final three months of the year, according to advance estimates released by the Ministry of Trade and Industry on Tuesday (Jan 2).
The flash estimates showed the trade-reliant economy expanded 3.1 per cent in the fourth quarter from a year earlier, easing from growth of 5.4 per cent in the previous quarter but beating expectations of 2.7 per cent in a Reuters poll.
On a quarter-on-quarter seasonally adjusted basis, the gross domestic product (GDP) for the October to December period also expanded at a slower pace of 2.8 per cent, compared to the 9.4 per cent growth in the preceding quarter. Economists surveyed by Reuters had a median forecast of 2.9 per cent.
The manufacturing sector remained the brightest spot in the economy with an expansion of 6.2 per cent on a year-on-year basis in the fourth quarter. This, however, was a moderation from the 19.2 per cent growth in the previous quarter.
On a quarter-on-quarter seasonally-adjusted annualised basis, the sector shrank by 11.5 per cent after surging 38 per cent during the July-September period.
Services producing industries, which account for two-thirds of the economy, expanded by 3 per cent in the fourth quarter from a year ago on the back of growth in the finance and insurance, wholesale and retail trade, as well as transportation and storage sectors.
But this was a slight slowdown from the 3.2 per cent growth in the previous quarter.
On a quarter-on-quarter basis, the services sector expanded at a seasonally-adjusted annualised rate of 7.5 per cent, faster than the 3.4 per cent growth in the third quarter.
The construction sector remained the laggard with a contraction of 8.5 per cent on a year-on-year basis in the fourth quarter, extending the 7.7 per cent decline in the previous quarter. The contraction was largely due to the weakness in private sector construction activities.
On a quarter-on-quarter seasonally-adjusted annualised basis, the sector shrank by 3.6 per cent, easing from the 5.5 per cent contraction in the preceding quarter.
Another Positive Year Ahead?
Singapore's trade-reliant economy has staged a remarkable turnaround in 2017, thanks largely to improving global demand for electronics products.
With the manufacturing sector in the driving seat, the economy clocked its quickest year-on-year expansion in nearly four years in the third quarter.
But economists have said that the sector will likely see a growth moderation due to a comparison against a high base recorded since the fourth quarter of 2016 – the quarter which the manufacturing industry began its turnaround.
This moderation in factory activity will likely continue in 2018 but economists, such as Maybank Kim Eng Research’s Chua Hak Bin, do not think it will be a cause for concern.
“I don't think we can expect manufacturing to keep running at the double-digit pace that we’ve seen. It will come down to single digits but it will remain a respectable number.”
Moving forward, the services and construction sectors will likely “contribute to a greater proportion of growth as manufacturing wanes”, added Dr Chua.
“Growth has broadened out, especially in services in the second half of 2017, and some of that momentum will strengthen further this year," he said.
UOB economist Francis Tan expects the battered construction industry to return to modest growth in 2018, following six consecutive quarters of contraction.
“Construction will become better in 2018 (and) we may finally see positive growth for the first time though a small one in the third quarter,” he said, citing the boost from the bringing forward of S$1.4 billion worth of public sector contracts and a revival in the local property market.
For 2018, both economists have an optimistic outlook on the economy though GDP growth may cool off slightly.
Dr Chua expects full-year growth to be 2.8 per cent, while Mr Tan has a forecast of 2.5 per cent given potential headwinds, such as a slowdown in China’s economy.
MTI said last month that it expects the Singapore economy to grow by 1.5 to 3.5 per cent in 2018.
In his New Year message on Sunday, Prime Minister Lee Hsien Loong said the economy was ending 2017 stronger than it started, with economic growth for the year at 3.5 per cent.
This full-year GDP estimate hits the upper limit of the Government’s revised growth forecast range of 3.0 to 3.5 per cent, and shows the economy picking up pace from 2 per cent growth in 2016.
Wages have also gone up across the board, especially for low- and middle-income earners, said Mr Lee.
The advance estimates released on Tuesday take into account data in the first two months of the quarter. MTI will release the GDP figures for the fourth quarter and the whole of 2017 in its Economic Survey of Singapore next month.