Rajiv Biswas, Asia-Pacific Chief Economist for IHS Global Insight
Key Points:
- The Singapore Ministry of Trade and Industry (MTI) downgraded Singapore’s 2016 GDP growth forecast from a range of 1.0% to 2.0% GDP growth to a range of 1.0% to 1.5% GDP growth for the 2016 calendar year.
- The final estimate of Singapore’s Q3 2016 GDP growth rate was revised up to 1.1% growth y/y, compared with the advance estimate of 0.6% growth y/y.
- On a quarter-on-quarter basis, Singapore’s Q3 GDP growth contracted by 2.0% q/q on a seasonally adjusted annualized basis according to the final estimate, somewhat better than the 4.1% contraction in the advance estimate for Q3 2016.
- In Q3 2016, all the main sectors of the economy showed negative growth on a q/q annualized basis, with the manufacturing sector showing a contraction of 9.1% q/q annualized, while construction declined by 0.8% q/q annualized and the services sector showed a 1.3% q/q annualized contraction.
- The finance and insurance sector has been particularly weak in the 2016 year-to-date, recording large negative growth rates in each of the first three quarters of 2016. The business services sector has also shown contraction in all of the first three quarters, albeit at a much more moderate pace.
- Singapore’s GDP growth when measured on a quarter-on-quarter basis has completely stalled during the first three quarters of 2016, since q/q annualized GDP growth in both Q1 2016 and also Q2 2016 was only 0.1% q/q, followed by the significant 2.0% contraction in Q3 GDP q/q.
- A key factor that has contributed to Singapore’s weak GDP growth performance has been the slump in exports of goods, with domestic exports showing large declines on a year-on-year basis during each of the first three quarters of 2016. While the biggest declines have been in oil-related exports, non-oil domestic exports have also declined on a y/y basis in each of the first three quarters.
Outlook:
The MTI has forecast that GDP growth in 2017 will be somewhat higher, in a range of 1.0% to 3.0% GDP growth, helped by improving global growth. Sustained global demand for semiconductors is expected to support the outlook for manufacturing, although the marine and offshore engineering sector is still expected to experience soft demand conditions. In the services sector, tourism as well as information and communications are expected to show improving growth in 2017, while the finance and insurance industry is expected to remain sluggish.
IHS Global Insight forecasts that Singapore’s GDP growth rate in 2017 will be 1.8%, with growth momentum continuing to be constrained by the transmission effects of China’s continuing economic slowdown and the slump in regional exports. However, world GDP growth is forecast to improve from 2.4% in 2016 to 2.8% in 2017, helped by stronger US GDP growth, which will provide some positive impact effects to Singapore’s exports and GDP growth.