Singapore escaped a technical recession after its economy grew in the fourth quarter last year thanks to a boost from services government data showed yesterday, but prospects for this year remain gloomy.
GDP rose by an estimated 1.1 percent year-on-year in the three months to December, from zero growth in the previous quarter, the Ministry of Trade and Industry said.
Analysts feared the economy may have slipped into a technical recession — two successive quarters of contraction — after Singaporean Prime Minister Lee Hsien Loong (李顯龍) said on Monday that GDP rose a mere 1.2 percent for the full year, below the government’s target of 1.5 percent to 2.5 percent.
Lee also said GDP was expected to grow just 1.0 percent to 3.0 percent this year.
“The prospects remain subdued for Singapore even though we averted a technical recession, and the weakness in the manufacturing sector underscores that vulnerability,” said Song Seng Wun (宋城煥), a regional economist at CIMB Research.
On a quarter-on-quarter basis, the economy expanded by a seasonally-adjusted annualized 1.8 percent in the December quarter, reversing a 6.3 percent contraction in the July to September period.
Weakness in the manufacturing sector was a major drag for the economy, but a resilient services sector took up some of the slack.
“Growth picked up on the back of firmer service sector activity, outweighing a contraction in the manufacturing sector led by a weak electronics cluster,” said Leif Eskesen, chief economist for India and Southeast Asia at HSBC.
“The positive impetus primarily came from wholesale and retail, finance and insurance, as well as ‘other’ services,” he said in a commentary.
Nomura Securities said in a market note that manufacturing “remains the weak spot” for the trade-driven economy.
Manufacturing shrank by an annualized 10.8 percent quarter-on-quarter in the October to December period as the European debt crisis and a sluggish US economy dampened global demand for Singapore’s exports, especially electronics.
The sector contracted by 0.2 percent last year.
The services sector rebounded strongly in the final three months of last year, rising 7 percent quarter-on-quarter from negative growth in the previous two quarters.
Overall, the services sector expanded 1.2 percent last year.
Construction contracted 8.9 percent quarter-on-quarter, but grew 8.8 percent for the full year.
Despite Singapore escaping a technical recession, there was little to cheer about as growth was expected to be soft in the coming months.
“With global headwinds expected to remain in place, growth is projected to remain muted in the coming quarters and not recover more noticeably until the second half of 2013,” Eskesen said.