The Singapore economy expanded by 2.9 per cent from a year ago for the second quarter, beating expectations. Growth was helped by stronger performing manufacturing and services sectors.
The better scorecard has led the Ministry of Trade and Industry (MTI) to narrow gross domestic product (GDP) growth forecast for 2017 to "2.0 to 3.0 per cent", from the earlier forecast of "1.0 to 3.0 per cent".
Singapore's GDP for the second quarter grew faster than the 2.5 per cent growth in the first quarter. Advance estimates had expected a 2.5 per cent year-on-year growth. On a quarter-on-quarter seasonally adjusted annualised basis, the economy grew 2.2 per cent, reversing from a 2.1 per cent contraction in the first quarter.
The strong showing from manufacturing last month had already prompted several economists to expect an upgrade in the final second quarter GDP print to between 2.8 per cent and 3.0 per cent on a year-on-year basis.
The outlook for the global economy has remained stable in recent months, with global growth on track to come in higher in 2017 as compared to 2016, said the MTI.
Barring unexpected outcomes in the global economy and key sectors in the domestic economy for the rest of the year, MTI expects GDP growth for the full year to come in at around 2.5 per cent.
In his annual National Day speech on Wednesday (Aug 9), Prime Minister Lee Hsien Loong said the Government expects Singapore's economy to grow by around 2.5 per cent this year, which would be higher than last year's growth of 2.0 per cent.
Even as global economic recovery is expected to continue on a "firm footing" for the rest of the year, downside risks such as anti-globalisation sentiments and global political risks and policy uncertainty remain, MTI cautioned. Also at this advanced stage of the United States' economic expansion, monetary policy could normalise faster than expected, thus causing global financial conditions to tighten more than anticipated, it noted.
In the US, the economy rebounded to grow at a faster pace in the second quarter of the year as compared to the first quarter. The growth momentum is expected to be sustained in the second half of the year, supported primarily by domestic demand. Meanwhile, the Eurozone economy is expected to remain stable, and to continue to grow at a modest pace for the rest of the year.
China's growth is projected to ease slightly in the second half of this year, following stronger-than-expected growth in the first half of the year. However, exports are expected to remain robust, with the recent pickup in external demand likely to be sustained into the second half of the year, thereby supporting GDP growth.
Against this external backdrop, the MTI said the manufacturing sector is likely to continue to provide support to the Singapore economy in the second half of the year. Likewise, externally-oriented services sectors such as the transportation and storage, wholesale trade and finance and insurance sectors are expected to benefit from the pickup in global trade.
The manufacturing sector expanded at a robust pace of 8.1 per cent year-on-year in the second quarter, following the 8.5 per cent growth in the previous quarter. Growth during the quarter was primarily supported by the electronics and precision engineering clusters, which expanded on the back of strong global demand for semiconductors and semiconductor-related equipment.
The services sector grew 2.4 per cent for the second quarter, up from the 1.4 per cent growth in the first quarter. Six out of the seven segments - wholesale and retail trade, transportation and storage, information and communications, finance and insurance, business services and other services industries - posted growth. Only the accommodation and food services segment contracted from a year ago.
The construction sector contracted by 5.7 per cent year-on-year, extending the 6.3 per cent decline in the previous quarter, due to a fall in both private sector and public sector construction output.