Singapore's economic growth slows sharply to 0.6% in Q3

SINGAPORE: For the third quarter of 2016, Singapore’s economy expanded by 0.6 per cent compared to the same period a year ago, advance estimates from the Ministry of Trade and Industry (MTI) showed on Friday (Oct 14).

That is much lower than a forecast of 1.7 per cent by private sector economists surveyed by the Monetary Authority of Singapore (MAS) last month, and marks a decrease from the previous quarter’s 2 per cent growth.

On a quarter-on-quarter, seasonally adjusted annualised basis, the economy shrank 4.1 per cent during the July to September period, a stark reversal from the already anaemic 0.2 per cent expansion in the previous three months.

Economists have largely expected dimmer prospects for Singapore’s economy in the final six months of 2016 amid additional global headwinds such as Brexit.

The Singapore Government in August shaved its full-year growth forecast to between 1 and 2 per cent, while Deputy Prime Minister Tharman Shanmugaratnam cautioned last month that the local economy would see growth come in at the lower end of the 1 to 2 per cent range this year.

MANUFACTURING, SERVICES CONTINUE TO WEIGH DOWN GROWTH

Describing the on-quarter GDP figure as a "big downside miss", ING's chief economist Tim Condon pointed out the sluggish manufacturing sector as the main drag on growth.

Manufacturing activity plunged 1.1 per cent over the same period last year, reversing from the 1.4 per cent expansion in the previous quarter. On a quarter-on-quarter basis, the sector contracted an annualised 17.4 per cent, a sharp reversal from the 2.1 per cent growth in the preceding quarter.

The sector, which makes up a fifth of Singapore's economy, was weighed down by a decline in the output of the transport engineering, biomedical manufacturing and general manufacturing clusters.

The construction sector slowed marginally to 2.5 per cent growth on a year-on-year basis in the third quarter, compared to 2.6 per cent in the previous quarter. Over the July to September quarter, the sector expanded at an annualised rate of 0.5 per cent, down from the 1.1 per cent expansion in the preceding quarter.

The slowdown was due to a sharper decline in private sector construction activities, MTI said.

Meanwhile, the services producing industries recorded a slight contraction of 0.1 per cent, a reversal from the 1.2 per cent expansion in the preceding quarter, pulled down primarily by a contraction in the wholesale and retail trade sector. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector shrank by 1.9 per cent, extending the 0.9 per cent decline in the preceding quarter.

The services sector, which makes up two-thirds of the economy, has contracted for the third consecutive quarter on a quarter-on-quarter basis, said ANZ economist Ng Weiwen. The last time this occurred was during the global financial crisis in 2008 to 2009.

“What’s under appreciated I think is that the services sector has continued to contract sequentially, meaning that two-thirds of Singapore’s economy remains entrenched in recession," Mr Ng said.

“Although the contraction was larger back then, it doesn’t negate the fact that tough times are here to stay with growth running risks of being stuck in the low gear for some time," he added.

Nomura economist Brian Tan echoed that sentiment, noting that there is little to be optimistic about, given that external headwinds are likely here to stay.

“The UK intends to trigger Article 50 next year and that's not great for the global growth outlook. Elsewhere, there are no strong indications of growth improving, with China still going to slow. So there seems to be more reasons to be bearish than positive," he told Channel NewsAsia.

Meanwhile, the Monetary Authority of Singapore announced on Friday that it wil lkeep monetary policy unchanged, in line with market expectations.

Source: Channel News Asia 14th October 2016

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Singapore's economic growth slows sharply to 0.6% in Q3

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