Singapore economy grows by 2.1 pct in 2015

An unexpected lift in the last three months boosted economic expansion for the year to 2.1 per cent – better than forecasters’ expectations, but still the slowest since 2009.

Singapore’s economy experienced a quarterly growth surge which made mockery of analysts’ estimates in the final three months of 2015. Moreover, risks remain in the horizon with potential capital flight that could result from further USA rate hikes and / or fears of further deceleration in China.

Construction and services cushioned the impact of the weak manufacturing sector in 2015.

Services sector activity grew 6.5 percent in the fourth quarter while construction rose 7.0 percent.

THE Singapore economy seems to have headed for a sweet denouement in an otherwise dreary 2015, but observers are not popping the champagne yet.

The trade ministry has projected GDP growth of between 1.0 and 3.0 percent in 2016. Economists cited cyclical and structural challenges that the sector has to overcome this year. It is interesting that the two-track growth trajectory in China, with the service PMI outperforming the manufacturing PMI, heralds a trend towards servitization that could be also apparent for the rest of the region. External competition, rising business costs and weak external demand were key challenges facing the manufacturing sector for the past years. On a quarter-on-quarter basis, the sector contracted 3.1 per cent, following the 3.5 per cent contraction in the previous quarter. A previous poll of 11 economists by Reuters showed that the median forecast came in at 1.3 % in 4Q.

“Singapore’s manufacturing sector is still mired in recessionary conditions, reflecting moderating Chinese growth, the broader regional slump in East Asian exports and transmission effects to the industrial supply chain”, said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight. Growth was supported mainly by the wholesale and retail trade, and finance and insurance sectors.

The Monetary Authority of Singapore eased its exchange rate policy for a second time previous year in October, saying weakening prospects for global growth would pose “headwinds” in the coming months. An index tracking private residential prices fell 0.5 percent last quarter from the previous period, according to preliminary data released Monday, taking the annual decline to 3.7 percent.

“While this sector is known to be a resilient and stable engine of growth for Singapore, performance of the sector going forward will continue to be affected by the existing domestic manpower crunch and drag from the manufacturing sector”, he said.