Singapore: Annual GDP growth revised up slightly in the second quarter, but still marks deceleration from Q1
August 13, 2018
A comprehensive estimate by the Ministry of Trade and Industry (MTI) released on 13 August showed that in the second quarter the economy grew a revised 3.9% year-on-year (previously reported: +3.8% year-on-year), down from Q1’s revised 4.5% (previously reported: +4.3% yoy). Q2’s figure undershot market expectations of 4.1% growth. In quarter-on-quarter seasonally-adjusted terms, growth was 0.6% (previously reported: +1.0% SAAR), down from a revised 2.2% in Q1 (previously reported: +1.5% quarter-on-quarter).
The slight upward revision to annual growth was driven by an expansion in manufacturing which was faster than previously estimated. Manufacturing growth clocked in at 10.2% in Q2 (Q1: +10.8% yoy), driven by the electronics, biomedical and transport engineering clusters. In contrast, growth in services was revised down from the preliminary estimate and marked a notable deceleration from Q1 (Q2: +2.8% yoy; Q1: +4.0% yoy) on more sluggish wholesale and retail trade and transport and storage sub-sectors. The construction sector continued to contract sharply (Q2: -4.6% yoy; Q1: -5.2% yoy), on limp activity in the public sector.
Annual economic growth is likely to moderate in H2, on a less favorable base effect, slower growth among key trading partners and ebbing momentum in the manufacturing sector following a stellar H1. However, the economy should remain robust, supported by outward-oriented sectors and a healthy labor market buttressing domestic demand. Recently announced property market curbs will likely dampen construction, although the MTI still expects the sector to bottom out later this year on increased public sector contracts. The principle downside risk to the outlook comes from escalating trade tensions between the U.S. and China, which could significantly hamper global trade flows and would hit Singapore’s highly open economy hard.
Author: Oliver Reynolds, Economist