Singapore narrows 2015 GDP growth forecast

Aug 11, 2015

The Ministry of Trade and Industry (MTI) has narrowed the growth forecast for the year to between 2 and 2.5 per cent, after gross domestic product growth for the second quarter came in at 1.8 per cent.

The economy grew by 1.8 per cent on a year-on-year basis in the second quarter of 2015, sharply lower than the 2.8 per cent growth in the preceding quarter, the Ministry of Trade and Industry (MTI) announced on Tuesday (Aug 11).

The figure is in line with the Government’s earlier estimate of 1.7 per cent and beat the median forecast of 1.5 per cent in a Reuters survey of 11 economists.

On a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 4 per cent, a reversal from the 4.1 per cent growth in the previous quarter.

The GDP growth forecast for 2015 has been narrowed to between 2 and 2.5 per cent, from an earlier forecast of 2 to 4 per cent.

“The global economy performed weaker than expected in the first half of 2015,” MTI said. “For the rest of the year, global growth is expected to pick up gradually, although the pace of growth is likely to be uneven across economies. In particular, the advanced economies are expected to see a gradual pick-up in growth, while the growth outlook of regional economies has generally softened.”

The US and Eurozone economies are projected to improve modestly this year. But China’s growth is projected to ease, weighed down by the on-going property market correction and excess capacity in the heavy industries, the ministry said, adding that stimulus measures by the Chinese government are expected to contain downward pressures on the economy.

In Singapore, externally-oriented sectors such as finance and wholesale trade are likely to support growth in the economy in the second half of the year. Domestically-oriented sectors such as the business services and the information and communications sectors are expected to see modest growth. With the labour market expected to remain tight, growth in some labour-intensive sectors such as food services may be weighed down by labour constraints, MTI said.

Q2 2015: SECTOR-BY-SECTOR

The manufacturing sector contracted by 4.9 per cent year-on-year, extending the 2.4 per cent decline in the previous quarter. The sector was primarily weighed down by declines in the output of the biomedical manufacturing and transport engineering clusters. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector contracted by 18.3 per cent, reversing from the 1.7 per cent growth in the first quarter.

The construction sector expanded at a faster pace of 2.5 per cent year-on-year compared to the 1.1 per cent in the previous quarter. Growth was supported by a pick-up in public sector construction works. On a quarter-on-quarter basis, the sector grew at an annualised rate of 2.9 per cent, slower than the 4.2 per cent growth in the preceding quarter.

The wholesale and retail trade sector grew by 5 per cent year-on-year, slightly slower than the 5.3 per cent expansion in the previous quarter. Growth was driven by both the wholesale trade and retail trade segments, with the latter being supported in turn by robust motor vehicle sales. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector shrank by 1.7 per cent, a reversal from the 20.5 per cent growth in the preceding quarter.

The transportation and storage sector contracted by 0.9 per cent year-on-year, in contrast to the 1.4 per cent growth in the previous quarter. The pullback was largely due to the water transport segment, which contracted on the back of a decline in sea cargo handled. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector contracted by 10.3 per cent, after clocking in growth of 6.5 per cent in the previous quarter.

The accommodation and food services sector contracted at a faster pace of 0.6 per cent year-on-year compared to the 0.1 per cent decline in the previous quarter. The slowdown in the sector was largely due to sluggish performance in the food and beverage segment. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector shrank by 1.4 per cent, following the contraction of 6.5 per cent in the preceding quarter.

The information and communications sector grew by 4.5 per cent year-on-year, moderating from the 4.9 per cent growth in the previous quarter. Growth was mainly driven by the IT and information services segment. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector expanded by 4.9 per cent, faster than the 1.1 per cent growth in the previous quarter.

The finance and insurance sector posted growth of 7.1 per cent year-on-year, extending the 7.8 per cent growth in the previous quarter. Growth was largely underpinned by the fund management segment. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector grew by 2.5 per cent, after contracting by 12.8 per cent in the preceding quarter.

The business services sector expanded by 2.0 per cent year-on-year, slower than the 3.2 per cent growth in the previous quarter. Growth was supported by the rental and leasing and other administrative and support services segments. On a quarter-on-quarter seasonally-adjusted basis, the sector contracted at an annualised rate of 3.6 per cent, reversing the 3.1 per cent growth in the previous quarter.

The “other services industries” grew by 1.6 per cent year-on-year, similar to the 1.8 per cent growth in the previous quarter. Growth of the sector was supported by the public administration and defence and education, health and social services segments. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector expanded by 4.4 per cent, a reversal from the 0.7 per cent decline in the preceding quarter.

Source: Channel NewsAsia