Singapore: Economic growth remains at one-decade low in Q3
July 12, 2019
Singapore’s economy continued to splutter in the third quarter. Year-on-year growth matched the second quarter’s marginal 0.1% year-on-year expansion which marked the weakest performance in just over one decade. Meanwhile, in quarter-on-quarter seasonally-adjusted annualized terms, economic growth accelerated to 0.6%, swinging from a revised 2.7% drop in the Q2 (previously reported: -3.3% quarter-on-quarter) and thus dodging a technical recession.
Subdued annual growth largely reflected ongoing weakness in the manufacturing sector, which remained under pressure from the global tech slump and lingering trade tensions between the United States and China, offsetting sustained strength in the construction sector. The manufacturing sector contracted 3.5% over the same quarter a year prior (Q2: -3.3% year-on-year) due to declining output in the electronics, precision engineering and transport engineering subsectors. As noted by Irvin Seah, senior economist at DBS: “the worst of the manufacturing growth cycle could be over, but caution that growth in this sector will remain lacklustre amid weak global demand and uncertainties around the ongoing trade talk between the US and China.”
More positively, activity in the construction sector rose 2.7% year-on-year in the third quarter (Q2: +2.8% year-on-year), driven by a pick-up in both public and private sector activity. Meanwhile, growth in the services sector slowed marginally from a 1.1% expansion in Q2 to a 0.9% increase in Q3. The moderation in the services sector was dragged on by export-oriented sectors suffering from weakened external demand.
Looking ahead, external headwinds will continue to cloud the economic panorama of the trade-dependent economy next year. Lingering Brexit uncertainties, slowing growth in the Euro area, the ongoing trade despite between the United States and China and a slowing economy in the latter remain key downside risks to the outlook. On the other hand, the government’s fiscal measures should support the economy and cushion moderating domestic demand.
Author: Jan Lammersen, Economist