Singapore: Singapore’s economy performed better in the first quarter than the government had earlier estimated, led by a surge in manufacturing that may not be repeated as exports remain under pressure.
Gross domestic product (GDP) expanded an annualised 0.2 per cent from the previous three months, the Ministry of Trade and Industry in an e-mailed statement on Wednesday. That compares with the department’s April estimate of zero percent and the median forecast of 0.6 per cent in a Bloomberg News survey of 12 economists.
Singapore 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, fuelled mainly by pharmaceuticals, may prove to be short-lived.
"There’s not too much to get excited about here,” said Song Seng Wun, 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 per cent to 5 per cent this year, according to a separate report released by International Enterprise Singapore on Wednesday. That compares with a February projection of zero to 2 per cent expansion.
Loh Khum Yean, 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 in 2016,” he told reporters.
The data justifies the central bank’s unexpected move in April to ease its policy stance, saying it won’t seek currency appreciation, CIMB’s Song said. Consumer prices have declined every month since November 2014.
The Singapore dollar gained about 0.1 per cent to 1.3801 against the US dollar as of 11:30am local time, while the Straits Times Index climbed 1.1 per cent.
The government on Wednesday maintained its 2016 GDP growth forecast of 1 per cent to 3 per cent. The manufacturing sector expanded an annualized 23.3 percent in the first quarter, while construction grew 10.5 per cent.
That was offset by a 5.9 per cent plunge in the services sector, the biggest quarterly drop since the 2008-2009 recession. The finance and insurance industry contracted an annualized 15.2 per cent, while wholesale and retail trade services dropped 10.3 per cent.
"Despite some tentative improvement in growth momentum in March-April, risks are skewed to the downside,” Wei Zheng Kit, an economist at Citigroup in Singapore, said in a note to clients. If further disappointing data puts the central bank’s "implicit expectations” of 1.6 per cent to 1.7 per cent growth at risk, it may be prompted to ease policy again in October, he said.