Singapore: Q4 economic growth revised down; government announces expansionary 2019 budget
February 15, 2019
Comprehensive national accounts data released on 15 February by Singstat showed that the economy slowed by more than previously estimated in the final quarter. Growth was 1.9% year-on-year in Q4, down from a preliminary estimate of 2.2% and below Q3’s revised 2.4% (previously reported: +2.3% year-on-year). In quarter-on-quarter SAAR terms, the economy expanded a revised 1.4% (previously reported: +1.6% SAAR), matching Q3’s print.
Both the manufacturing and services sectors performed worse than previously anticipated in the final quarter. However, manufacturing growth was still robust at 5.1% (Q3: +3.5% yoy), supported by the biomedical manufacturing, transport engineering and electronics clusters. The services producing sector was up 1.8% in annual terms (Q3: +2.7% yoy), hampered by a contraction in the wholesale and retail trade subsector. In contrast, the construction sector declined by less than preliminary data had suggested, shrinking 1.0% over the same quarter a year prior (Q3: -2.3% yoy). The contraction came amid a correction in the housing market and soft public construction activity.
Looking ahead, the economy should expand at a solid pace, although growth will be more sluggish than in 2018 as a whole. Activity should be supported by healthy business investment and the government’s more expansionary fiscal stance. However, slowing growth in China could hurt export demand, while U.S.-China trade tensions pose a downside risk to the outlook.
On 18 February, the government announced an expansionary FY 2019 budget, in a bid to lift growth and counterbalance external risks. The budget will boost spending on defense and health, and sets SGD 6.1 billion aside for the Merdeka Generation Fund, which aims to improve the healthcare of the elderly. Moreover, SGD 1.1 billion will be allocated to the Bicentennial Bonus, which includes a tax rebate and cash vouchers for low-income Singaporeans. As a result of this fiscal stimulus, the government sees a budget deficit of 0.7% of GDP for FY 2019, contrasting an expected 0.4% surplus in FY 2018.
Author: Steven Burke, Economist