Singapore GDP Q2 2016


Singapore: Economic growth accelerates marginally in Q2 2016

August 11, 2016

According to a new estimate released by the Ministry of Trade and Industry on 11 August, in Q2, the economy grew a revised 0.3% over the previous quarter at a seasonally adjusted annualized rate (previously reported: +0.8% quarter-on-quarter SAAR). The reading was slightly above the revised 0.1% rise recorded in Q1 (previously reported: +0.2% qoq SAAR) but undershot market expectations of a stronger 0.8% increase.

The overall result was largely influenced by the less negative tally registered in the important services sector, which dropped 0.6% and marked an improvement compared to Q1’s steep 4.9% contraction. The result recorded in the services sector came on the back of the rebound observed in both the wholesale and retail trade and the information and communication segments and of the milder drop registered in the financial services segment. Moreover, growth in the construction sector accelerated from the weak 1.4% increase tallied in Q1 to a more robust 5.3% growth in Q2. On the downside, the manufacturing sector slowed abruptly, tallying 1.0% growth, which represented a sharp deceleration from the 18.7% expansion recorded in the first quarter. Nevertheless, it must be said that Q1’s remarkable expansion in the manufacturing sector had been strongly influenced by a temporary increase in the traditionally volatile pharmaceutical production.

In year-on-year terms, GDP expanded a revised 2.1% in Q2 (previously reported: +2.2% year-on-year), which mirrored the 2.1% growth recorded in Q1.

Commenting on the release, Benjamin Shatil, Economist at J.P.Morgan, adds:

“The final print of Singapore’s 2Q GDP was weaker than expected at 0.3%q/q saar, leaving headline GDP growth at 2.1%oya. After a strong run, softening services output has become the key drag on activity, contracting in each of the past two quarters. This marks an unusually weak outcome for services; the last time the sector contracted in two consecutive quarters was in 2008-09. Expenditure-side data were mixed, but aside from a strong expansion in government consumption and fiscal-related investment outlays, the trend remained sluggish last quarter. The fact that GDP growth was virtually flat through the quarter despite particularly firm government spending as well as a 14.0%q/q saar pop in exports suggests broader underlying weakness. The economy barely expanded through 1H16, and we see little scope for a pickup in momentum in coming quarters.”

The Monetary Authority of Singapore expects GDP to grow at a rate of between 1.0% and 2.0% in 2016. FocusEconomics Consensus Forecast panelists project that the economy will expand 1.7% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects growth to accelerate to 2.0%.

Author: Massimo Bassetti, Economist

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