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Singapore on track to meet full-year GDP growth forecasts

Singapore on track to meet full-year GDP growth forecasts

Singapore is on track to meet its GDP growth forecast for the year after a new survey of private-sector economists showed increasing confidence in the manufacturing sector.

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By Meili Chen 07.09.2018

Singapore is on track to meet its GDP growth forecast for the year after a new survey of private-sector economists showed increasing confidence in the manufacturing sector. However, other external risk factors will continue to apply pressure during the rest of 2018.

The country’ GDP should grow by 3.2% for the year, according to economists polled in the latest survey from the Monetary Authority of Singapore (MAS). This figure is unchanged from the Q1 and Q2 polls conducted earlier this year and suggests that Singapore is weathering the impact of global trade tensions.

Market watchers believe that external factors could have an impact on the economy during the final four months of 2018, though many are not exactly sure whether this will boost or crimp growth. The domestic property market has slowed recently following the arrival of new real estate cooling measures.

Singapore is on track to hit 3.2% GDP growth, but the survey did not rule out the chances of stronger growth, with figures of between 3.5% and 3.9% still possible. However, it appears that Singapore’s economic growth is most likely to top out at 3.4%. The Ministry of Trade and Industry has been more conservative with its official forecast after growth slowed from 4.5% in Q1 to 3.9% in Q2.

The manufacturing sector could be a key growth driver, as economists have increased their forecast for expansion again for the full year. They pegged annual growth at just 4.3% back in March, but this inched higher to 5.3% in June before soaring to 7.6% in the latest survey.

Alvin Liew, Senior Economist for United Overseas Bank, said: “Earlier this year, we factored in a slowdown for Singapore’s manufacturing activity in the second half of 2018 due to two factors: the high growth of the electronics cluster in 2017 may result in a slower pace of expansion in 2018, and rising US-China trade tensions may impact the global trade outlook. This could, in turn, lead to a negative spillover effect on Singapore's manufacturers, who may see a decrease in export orders as well as a dip in overall business sentiment.”

Liew added that industrial production has surpassed expectations during the first eight months of the year and that the better-than-forecast return has played a role in the recent forecast revision for the manufacturing sector. Projected growth for food and accommodation services also saw a hike to 2.9%.

Singapore is not receiving all good news, however, as the construction sector is set to log a 4.2% contraction for the year, which is a marked drop on the 2.1% decline noted in June’s survey. Finance and insurance, and wholesale and retail trade should also see slower rates of expansion at 6.7% and 1.5%, respectively.

Liew said: “Compared with the manufacturing sector, the construction sector in Singapore has under-performed in the first half of 2018 – both on public- and private-sector projects. The growth outlook of the construction sector could be further impacted by the delay in the construction of the high-speed rail between Singapore and Kuala Lumpur and the additional cooling measures in the private property market."

External factors are a growing concern for economists, as 42% said that weak external growth could be a risk, which is up from the 11% who flagged it as a possible negative factor in the previous survey. Higher interest rates may also cause problems, according to 37% of economists, while the same number warned of a possible slowdown in China’s economy

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