Robust GDP growth in Q1 spells good news for Singapore

SINGAPORE — The economy maintained a robust expansion rate in the first quarter of this year, with all key sectors registering growth, and economists expect the trend to continue for the rest of the year amid the positive outlook for the global economy.

Singapore’s gross domestic product rose 4.9 per cent year-on-year between January and March, the Ministry of Trade and Industry (MTI) announced yesterday, in line with the performance recorded in the previous quarter.

This puts GDP on track to grow by 2 to 4 per cent this year, as previously forecast, supported by recoveries in the US and eurozone economies, MTI Permanent Secretary Ow Foong Pheng said at a press briefing.

“The US economy is expected to post modest growth in 2014,” Mrs Ow said. “Private consumption expenditure is expected to rise on the back of improvements in household wealth and consumer sentiments. The eurozone is expected to return to growth this year after contracting the year before.”

Against this backdrop, “externally-oriented sectors such as manufacturing and wholesale trade are likely to provide support to growth, in line with the gradual pick-up in the global economy”, she added.

“Domestically-oriented sectors such as business services are also expected to remain stable.”

While the first-quarter growth came in lower than the 5.1 per cent forecast in advance estimates, the gap was partly a result of the MTI’s rebasing of national accounts from base year 2005 to 2010, CIMB economist Song Seng Wun noted.

“The downward revision by no means indicates a weaker economic performance in the first quarter. In fact, a 4.9 per cent on-year growth is actually not bad since the growth in 2013’s first quarter was also revised up, from 0.6 per cent to 1.5 per cent,” he said. “For the rest of the year, we are likely to see a similar growth rate, and the impact from the potential headwinds — such as uncertainties in the pace of the global recovery — should not be too disruptive to us.”

ANZ Asia-Pacific economist Daniel Wilson agreed. “We are expecting 3.5 per cent full-year growth. For the first time in a number of years, we are likely to see growth from all members of G3 (the US, Europe and Japan). As a result, Singapore’s manufacturing will see some pick-up this year, but financial services may see some moderation after the rapid growth last year.”

In the first quarter, manufacturing was the biggest growth contributor, expanding 9.8 per cent on-year from the 7 per cent expansion in the previous quarter, on the back of a sharp rebound in the biomedical cluster, while chemicals and transport engineering also expanded strongly.

At the same time, the contraction in non-oil domestic exports has continued to slow since early last year, to a 1 per cent on-year drop in the first quarter, improving from the previous quarter’s 2.1 per cent decline, International Enterprise Singapore said, adding that total trade and NODX should grow between 1 and 3 per cent this year.

Meanwhile, the finance and insurance sector expanded by 5.4 per cent on-year, slowing from the 10.5 per cent growth in the previous quarter, as markets were undermined by poor sentiment. DBS economist Irvin Seah said that while the bank is maintaining its full-year growth forecast at 4 per cent, the outlook is not without risks.

“The drag from domestic restructuring will continue to weigh down on the near-term growth prospects of the economy,” he added. “The effect will be most acute in labour-intensive sectors. The key services sector, which accounts for about 68 per cent of overall GDP, will likely bear the brunt.” The labour crunch is also expected to drive up the inflation rate, as businesses pass on higher wage costs to consumers.

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