Singapore’s economy performed better in the first quarter than the government had earlier estimated, led by a surge in manufacturing that might not be repeated as exports remain under pressure.
GDP expanded an annualized 0.2 percent from the previous three months, the Singaporean Ministry of Trade and Industry said in an e-mailed statement yesterday. That compares with the department’s estimate of zero percent for last month and the median forecast of 0.6 percent in a Bloomberg News survey of 12 economists.
STILL VULNERABLE
Singapore’s economy is among the most vulnerable in Asia to swings in global demand. With the world economic outlook weakening this year, the boost to Singapore’s manufacturing last quarter, fueled mainly by pharmaceuticals, might prove to be short-lived.
“There’s not too much to get excited about here,” said Song Seng Wun (宋城煥), an economist at CIMB Private Banking in Singapore. “It’s better than initially expected, but the economy is still plodding around until we see a more meaningful pick-up in global demand.”
The government is projecting a decline in non-oil domestic exports of 3 to 5 percent this year, according to a separate report that was released yesterday by International Enterprise Singapore. That compares with a February projection of zero to 2 percent expansion.
Loh Khum Yean (羅錦賢), permanent secretary at the Ministry of Trade and Industry, said the global economic outlook had worsened since February. He cited a possible drop in demand from China and faster-than-expected interest rate increases in the US as key risks for Singapore.
“Against this backdrop, the Singapore economy is expected to grow at a modest pace [this year],” he said.
POLICY EASING
The data justifies the central bank’s unexpected move last month to ease its policy stance, saying it would not seek currency appreciation, Song said. Consumer prices have declined every month since November 2014.
The government maintained its GDP growth forecast of 1 to 3 percent for this year. The manufacturing sector expanded an annualized 23.3 percent in the first quarter, while construction grew 10.5 percent.
That was offset by a 5.9 percent plunge in the services sector, the biggest quarterly drop since the 2008-2009 recession. The finance and insurance industry contracted an annualized 15.2 percent, while wholesale and retail trade services dropped 10.3 percent.
“Despite some tentative improvement in growth momentum in March-April, risks are skewed to the downside,” Kit Wei Zheng (吉偉正), an economist at Citigroup Inc in Singapore, said in a note to clients.
If further disappointing data puts the central bank’s “implicit expectations” of 1.6 to 1.7 percent growth at risk, it might be prompted to ease policy again in October, he said.
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