Singapore’s economy shrank for the first time in five quarters after its manufacturing and services industries weakened, a contraction that may be short-lived as the global recovery strengthens.
GDP fell an annualized 2.7 percent in the three months to Tuesday from the previous quarter when it expanded a revised 2.2 percent, the trade ministry said in a statement yesterday.
GDP grew 4.4 percent in the three months through last month from a year earlier, compared with a median survey estimate of 4.8 percent.
Singapore’s economy could benefit this year from improving demand in the US and Europe, even as companies in the city-state grapple with rising costs and curbs on cheap foreign labor.
The country’s trade promotion agency said in November last year that exports will rebound this year after contracting last year, easing pressure on the central bank to allow the currency to weaken to support overseas shipments.
“The global recovery is still definitely intact,” said Joey Chew, a Singapore-based economist at Barclays PLC. “2014 looks like it’s going to be much stronger than 2013 for the global economy so this will definitely support Singapore.”
The Singapore dollar weakened more than 3 percent last year even as the central bank said it would maintain an appreciating stance to curb inflation pressures.
The depreciation was the biggest annually since 2001, according to data compiled by Bloomberg.
The Monetary Authority of Singapore said in October last year it will maintain a modest and gradual appreciation of the currency.
It resisted providing stimulus as labor shortages and record home prices fueled consumer price gains.
The central bank forecasts inflation to be 2 percent or 3 percent this year.
“The MAS will not do much to facilitate growth, it will rather err on the side of price stability,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd.
However, “there’s no compelling need for them to tighten just yet,” he said.
The economy expanded 3.7 percent last year, accelerating from a 1.3 percent pace the previous year. Singaporean Prime Minister Lee Hsien Loong (李顯龍) on Tuesday reiterated a forecast for growth of between 2 and 4 percent this year.