Singapore: Economic growth ticks down in the final quarter
According to an advanced estimate released on 2 January by the Ministry of Trade and Industry (MTI), the economy slowed in the fourth quarter due to softer growth in the services producing industries. The economy expanded 2.2% on an annual basis in Q4. This was marginally lower than the revised 2.3% figure recorded in Q3 (previously reported: +2.2% year-on-year). The Q4 print was the weakest since Q3 2016 and fell short of analysts’ expectations of 2.3%. In quarter-on-quarter seasonally-adjusted annualized terms (SAAR), GDP growth expanded 1.6% in Q4, down markedly from the revised 3.5% recorded in Q3 (previously reported: +4.7% SAAR).
Growth in service producing industries moderated from 2.6% in Q3 to 1.9% in Q4, with the expansion mainly supported by the finance and insurance sector. Manufacturing growth in Q4 accelerated to 5.5% year-on-year from 3.7% in Q3, driven by stronger growth in the biomedical manufacturing and electronic clusters. Moreover, weak public sector construction was chiefly behind the 2.2% contraction within the construction sector in Q4 (Q3: -2.5% year-on-year). The advanced Q4 reading puts economic growth for 2018 at 3.3%, which is slightly softer than the 3.6% expansion logged in 2017.
Looking to 2019, growth will likely be notably slower than 2018, as trade disputes, weaker Chinese demand and a slowdown in the U.S. weigh on manufacturing and the external sector.
In a similar vein, DBS Bank’s economist Irvin Seah comments: “External headwinds have picked up. Global electronics demand is easing, and the trade war is adding salt to wound in the near term. Trade diversion from China to ASEAN countries could help but this will take time to materialise. Besides, liquidity conditions will get tighter in 2019. Although rising US rate expectations have simmered, we still see the Fed Funds Rate increasing another 50 bps to 3%. Overall, last year has been a roller coaster ride but this year could be just as challenging.”
Meanwhile, Robert Carnell, ING’s chief economist for Asia-Pacific, says: “US President Trump seems keen for some sort of deal with President Xi on trade, though it remains to be seen what sort of deal, and how quickly tariffs can be reduced or removed. In the meantime, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) of 11 countries, including Singapore, substantially reduces tariffs and could give other trade in the region a helpful boost.”