Singapore’s economy expanded slower than initially estimated due to a contraction in the services sector over the second quarter, underscoring concerns over the impact on the trade-reliant economy from Brexit and weakening global demand.
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SINGAPORE’S Ministry of Trade and Industry on Thursday narrowed its 2016 GDP (gross domestic product) growth forecast to one-two per cent from its earlier estimate of one-three per cent.
That compared with the government’s initial estimate of a 0.8% rise, released on July 14. The market had not been expecting these revisions.
“In line with weaker global growth outlook, and barring the full materialization of downside risks, the 2016 growth forecast for the Singapore economy is narrowed to 1.0 to 2.0%, from 1.0 to 3.0%”, the ministry said. In particular, the UK’s vote to leave the European Union has heightened uncertainly across the Europe. On a quarter-on-quarter basis, growth was at 0.3 per cent, compared to a 0.1 per cent growth in the preceding quarter.
In the second quarter of 2016, the economy grew by 2.1% year-on-year, which is unchanged from the first quarter.
Domestically, the growth of externally oriented services sectors, such as finance and insurance and wholesale trade, has slowed, the ministry said.
Growth in the construction sector fell to 3.3% year-on-year, from 4.0% in the first quarter, weighed down by a decline in private-sector construction works. “While the manufacturing sector has seen an improvement in performance on account of pockets of strength in segments such as semiconductors and biomedical manufacturing, this may not be sustained in the light of sluggish global economic conditions”. And the MAS has explicitly said so; that policy is appropriate baring “marked deterioration”. “If this materialised, the Chinese economy could slow down more sharply than expected”, he said, adding that China’s GDP growth is projected to be lower than 2015’s 6.9 per cent.
“We do not think that the MAS will further weaken the Singapore dollar via a one-off reduction in the midpoint, as core inflation has remained on an upward trend in recent months”. Still, the MAS said it also was closely watching risks related to Brexit, the USA economic recovery and the slowdown in China. In y/y terms, growth was revised to 2.1 percent from 2.2 percent.
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Singapore’s marine and offshore industry, which includes the world’s two biggest oil rig builders Keppel Corp. and Sembcorp Marine Ltd., provides about 19 percent of the island-nation’s manufacturing jobs. Unemployment rose to its highest level in more than two years in the second quarter, at 2.1 percent.
