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Singapore economy logs 2.5% growth in Q1, higher than expectations

SINGAPORE: For the first quarter of 2017, Singapore’s gross domestic product (GDP) expanded by 2.5 per cent compared to the same period a year ago, advance estimates from the Ministry of Trade and Industry (MTI) showed on Thursday (Apr 13).

That is higher than the median forecast of 2.4 per cent in a Reuters poll but marks a pullback from the previous quarter’s 2.9 per cent growth.

On a quarter-on-quarter, seasonally adjusted annualised basis, the economy shrank 1.9 per cent during the January to March period, coming in line with expectations. While the annualised GDP reading is a stark reversal from the stellar 12.3 per cent rebound last quarter, economists said it is not a cause for worry.

“The quarter-on-quarter figure tends to be very volatile. A mild pullback shouldn’t be a surprise given the manufacturing surge last quarter,” said Maybank Kim Eng economist Chua Hak Bin, referring to the strong turnaround in factory output towards the end of 2016 which provided a surprise lift to the overall economy.

For the first three months of 2017, Singapore’s manufacturing sector contracted 6.6 per cent on a quarter-on-quarter seasonally adjusted annualised basis, reversing from the 39.8 per cent surge in the previous quarter.

On a year-on-year basis, the sector moderated from growth of 11.5 per cent to 6.6 per cent, which according to Dr Chua is still a “very healthy reading”.

In other sectors, construction continued to underperform by shrinking 1.1 per cent year-on-year in the first quarter, extending the 2.8 per cent decline in the previous quarter on the back of a slowdown in private sector construction activities. On a quarter-on-quarter seasonally adjusted annualised basis, the sector expanded by 5.4 per cent, accelerating from the 0.8 per cent growth in the preceding quarter.

The services producing industries grew 1.5 per cent on a year-on-year basis in the first quarter, improving from growth of 1.0 per cent in the previous quarter. However, on a quarter-on-quarter basis, the sector shrank at an annualised rate of 2.2 per cent after expanding 8.4 per cent in the last quarter.

Such mixed figures show that the local services sector, which accounts for about two-thirds of the economy, continues to “punch below its weight”, said Mizuho Bank’s senior economist Vishnu Varathan.

“Anything related to the property or banking sector is not in high gear and with these uncertain (components), any recovery is not going to come as quickly as what we’ve seen in the manufacturing sector,” he told Channel NewsAsia. “Services will remain a lingering drag.”

MTI will release the revised GDP data for the first quarter, including performance by sectors, sources of growth, inflation, employment and productivity, in its Economic Survey of Singapore in May.

The advance GDP estimates are computed largely from data in the first two months of the quarter – in this case, January and February. They are intended as an early indication of GDP growth in the quarter and are subject to revision when more comprehensive data becomes available.

Private sector economists had forecast Singapore’s first-quarter GDP to be 2.6 per cent, according to the latest quarterly survey by the Monetary Authority of Singapore (MAS) in March. For the full year, economists raised their GDP forecast to 2.3 per cent – a sharp hike from the previous estimation of 1.5 per cent.

That marks a pick-up from the 2.0 per cent growth recorded in 2016, and would be in the upper half of the Government’s official 2017 GDP forecast range of 1 to 3 per cent.

Noting the growth figures, Prime Minister Lee Hsien Loong said that Singapore’s economy “did quite well in Q1” and that the “outlook is encouraging”.

In a Facebook post on Thursday evening, Mr Lee added that he met labour movement leaders during the week to find out “how things are in their different industries”. 

“They spoke about the challenges they are facing, the changes they foresee, and how they are helping workers cope,” he wrote.

Mr Lee added that he will talk about Singapore’s economy and job situation at the upcoming May Day Rally. 

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Government is keeping a close eye on business costs, economy: Lim Hng Kiang

SINGAPORE: The Government will continue to support local firms through challenges and is keeping a close eye on business costs, said Minister for Trade and Industry (Trade) Lim Hng Kiang at the Committee of Supply debate for his ministry’s budget on Friday (Mar 3).

Rising business costs, in particular rental costs, have been brought up by several Members of Parliament (MPs) this week as a key issue that local firms are struggling with.

Mr Lim said the Government will keep a close eye on business costs to ensure they do not rise excessively. On the issue of rental costs, its contribution to total business costs varies across sectors, said Mr Lim. He added that “the problem has not been so severe”, as the rentals of industrial, commercial, retail and office spaces have been declining in recent quarters.

Amid an uncertain outlook and an uneven performance across the economy, Mr Lim said business sentiment in the country has been weak and a sense of insecurity lingers among local workers. But he added that “the Government closely monitors our economy, and stands ready to take decisive action if needed”.

However, he stressed that the economy stays on a “steady and stable growth trajectory”, with expectations for economic growth in 2017 to be similar to 2016.

In the short to medium term, Singapore’s restructuring efforts are gaining traction and the productivity gap between Singapore and other advanced economies has been narrowed. Meanwhile, the local labour market remains resilient, with wage growth staying comparable to many advanced economies, while Singapore has remained globally competitive by attracting a steady pipeline of investments.

STAYING OPEN AND CONNECTED

Externally, Mr Lim emphasised that Singapore needs to remain open and connected.

The Government will do so by continuing to leverage trade agreements. In 2015, Singapore’s network of 21 free trade agreements (FTAs) and economic partnership agreements with 32 trading partners in multiple regions have helped companies to benefit from tariff savings of more than S$ 900 million.

Moving forward, the Government will press on with the Regional Comprehensive Economic Partnership (RCEP), Mr Lim said. Singapore is also working with the ASEAN member states to improve trade facilitation through the ASEAN-wide Self-Certification regime and the ASEAN Single Window (ASW). These initiatives will also reduce the administrative burden and cost to traders, the minister added.

Singapore will also support homegrown firms by deepening linkages at the provincial, states and cities level, as well as strengthening internationalisation efforts.

According to Mr Lim, deeper linkages can be achieved via bilateral platforms and Government-to-Government (G2G) projects, such as in China where Singapore companies have made inroads through the seven provincial business councils. The third G2G project, the Chongqing Connectivity Initiative (CCI), “will also enable us to engage the provinces in Western China,” said Mr Lim.

Lastly, the Government hopes to provide support for companies through the Global Innovation Alliance, an initiative set up for Singaporeans to gain overseas experience and build networks.

“The future economy will be characterised by a global network of innovation and talent. By linking our enterprises and students with overseas partners in major innovation hubs and key demand markets, our companies and people will benefit from the opportunities and overseas exposure. Similarly, Singapore can also tap on the best global talent and ideas to stay at the forefront of innovation,” Mr Lim said. 

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Singapore economy grows 2% in 2016, helped by strong Q4

SINGAPORE: Singapore’s economy expanded 2 per cent last year, propped up by a strong showing in the fourth quarter as manufacturing output surged, according to data released by the Ministry of Trade and Industry (MTI) on Friday (Feb 17).

The full-year GDP figure picked up pace slightly from 2015’s 1.9 per cent, which was Singapore’s weakest annual rate of growth since 2009. It was higher than the earlier estimate of 1.8 per cent growth and surpassed the Government’s forecast for 2016 growth to be between 1 and 1.5 per cent this year.

Year on year, gross domestic product (GDP) grew 2.9 per cent over the October to December period, beating the earlier estimate of 1.8 per cent growth and was much faster than the 1.2 per cent growth in the third quarter.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded 12.3 per cent. This was even higher than the 9.1 per cent initially expected and marked a turnaround from the 0.4 per cent contraction in the July to September period, meaning that Singapore averted a technical recession defined as two straight quarters of declines in economic output.

Economic growth in the final quarter of 2016 was largely propped up by a surge in activities in the manufacturing sector, which grew by 11.5 per cent year-on-year on the back of robust growth in the electronics and biomedical manufacturing clusters.

2017 GDP GROWTH FORECAST AT 1% TO 3%

MTI has maintained the GDP growth forecast for 2017 at a modest pace of 1 to 3 per cent, noting that global growth is projected to pick up slightly this year. In particular, growth in the US and key ASEAN economies is expected to improve, even as growth in China continues to moderate, the report said.

However, uncertainties and downside risks in the global economy remain. Apart from political risks such as Brexit, there are signs of a rise in anti-globalisation sentiments and if protectionist approaches become the norm, global trade will be adversely affected leading to knock-on effects on economic growth worldwide. MTI said.

In addition, if monetary conditions tighten further in China and result in a steeper-than-intended pullback in credit, investment spending and hence growth in China could slow down more sharply than expected, the report added.

Against this backdrop, externally oriented sectors such as manufacturing as well as transportation and storage are likely to provide support to growth in the Singapore economy this year. However, the outlook for the construction sector has weakened as fewer contracts were awarded in the last two years amid sluggish private sector demand. Other sectors like marine and offshore, retail and food services are also likely to continue to face headwinds, MTI said. 

Mr Loh Khum Yean, Permanent Secretary for Trade and Industry, said the better-than-expected performance of the manufacturing sector in the fourth quarter was a surprise and expects this turnaround in factory output to continue into 2017.

However, Mr Loh noted that the outlook of the rest of the manufacturing and services appears mixed, with sub-segments such as marine and offshore likely to face continued challenges. Given the “mixed and varied picture”, the MTI expects next year’s GDP growth to be “broadly similar” to 2016.

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Ahead of Budget 2017, NTUC calls for support to help workers transition into new economy

SINGAPORE: The labour movement on Tuesday (Jan 17) called on the Government to provide more support to help workers transition into the new economy.

It said it is particularly concerned about people’s ability to maintain their competitiveness, given the fast-changing labour market brought about by rapid technological disruption, new requirement for skills as well as an ageing and shrinking workforce.

In its recommendations for Budget 2017, the National Trades Union Congress (NTUC) outlined four key areas to focus on, among them to improve the system to help the unemployed find jobs.

NTUC suggested that the Government share Jobs Bank information with its Future Jobs, Skills and Training (FJST) capability and Employment and Employability Institute (e2i), so that both parties can better match workers to jobs. The labour movement said this would also help it identify the new skills which are required and put in place relevant training programmes.

MAKE TRAINING COURSES MORE ACCESSIBLE

To ensure workers remain employable, the labour movement called on the Government to “plug existing structural gaps” in the current systems of training, citing a recent survey it conducted which showed that almost half of the respondents did not attend training or upskilling courses in the past year.

The NTUC proposed that employees be given more training leave and training allowances, as well as credit top-ups to the SkillsFuture scheme. Courses should also be made modular and “bite-sized”, it said.

To help women who want to re-enter the workforce, the labour movement suggested a “returnship programme” – similar to an internship – where these women enter a job trial for several months, before they are formally employed.

It also proposed a special employment credit for employers who hire these women.

IMPROVING PRODUCTIVITY, FAIR TERMS FOR WORKERS

More support for businesses is required as they adopt measures that are less labour-intensive, said the labour movement. “The Government can take the lead in industry transformation projects … tripartite partners will need to help all companies up their productivity game, and ensure that such gains are shared with their workers,” it said.

It added that productivity schemes can be enhanced with sector-level projects and resource-pooling among companies, with special emphasis on sectors such as F&B, retail and construction.

With changing employment models, the labour movement is also proposing a relook of laws to better protect the interests of workers on non-traditional work arrangements, such as contract workers and freelancers. It said outsourced workers, too, must be protected and suggested enhancing the law governing procurement practices for outsourced services.

“Though we may face short-term and more immediate challenges, all parties – from the Government, businesses, working people to society at large – will need to endeavour to prepare for what lies ahead,” said NTUC.

Budget 2017 will be delivered on Feb 20.

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Singapore's manufacturing economy expands for fourth straight month

SINGAPORE: Singapore’s factory activity expanded for a fourth straight month in December, with the Purchasing Managers’ Index (PMI) coming in at 50.6 last month, an increase of 0.4 point from November.

According to data from the Singapore Institute of Purchasing and Materials Management (SIPMM) released on Tuesday (Jan 3), the expansion was attributed to a faster rate of expansion in factory output, inventory holding, as well as new orders and new exports.

The readings also indicate that “the overall manufacturing sector has moderated”, said SIPMM, adding that the latest data shows “resilience of the manufacturing sector in spite of the uncertainties in the global economy”.

A reading above 50 means the manufacturing economy is expanding, while a reading below that indicates a contraction.

A corresponding index for the electronics sector also posted an expansion, with the PMI for December standing at 51.2, an increase of 0.7 point from the previous month.

For the growth in Singapore’s manufacturing to be sustained, there must be stronger demand from global economies, said Mr Vishnu Varathan, senior economist at Mizuho Bank. “Manufacturing is about breaking even, picking up slightly, but the bottomline is it remains very tentative and how global relations play out with the feedback into global demand. We remember that overall exports demand has remained suppressed,” he explained.

China’s manufacturing sector, for example, expanded for a fifth straight month in December, but growth slowed a touch more than expected due to persistent weakness in exports.

Until there is a noticeable improvement in demand, “it will be difficult to suggest that the manufacturing sector globally is set for an imminent rebound”, said Mr Varathan.

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Singapore's manufacturing economy expands for third straight month

SINGAPORE: Singapore’s manufacturing economy continued on its uptrend, with the latest Purchasing Managers’ Index (PMI) in expansion mode over the last three straight months.  

According to data from the Singapore Institute of Purchasing and Materials Management (SIPMM) released on Friday (Dec 2), November’s PMI came in at 50.2, up 0.2 point from the previous month. 

A reading above 50 means the manufacturing economy is expanding, while a reading below that indicates a contraction.

This comes on the back of slight improvements in new orders, new exports and factory output. 

However, the electronics sector grew at a slower pace, with the electronics PMI dipping by 0.3 point to come it at 50.5. This was due to slower expansion of new orders, new exports and factory output.

Singapore’s continued expansion of the manufacturing industry comes on the back of stronger PMI numbers from China, which is a key trading partner for the city-state. 

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Singapore’s economy is slowing: What you need to know

SINGAPORE: Singapore’s gross domestic product (GDP) for the third quarter may have performed better than initially expected, but analysts see little evidence that is sustainable.

Announced by the Ministry of Trade and Industry (MTI) on Thursday (Nov 24), both the year-on-year and quarter-on-quarter figures came in better than last month’s flash estimates, but were notably worse than the second-quarter’s growth numbers.

This slowing rate of GDP growth is expected to continue amid headwinds such as stubbornly weak external demand, and economists have begun tapering their forecasts for the local economy.

The 1.1 per cent (year-on-year growth in GDP) is nearly half of the second quarter’s growth rate. The economy is slowing for sure,” Ms Krystal Tan, an Asia economist from research firm Capital Economics, told Channel NewsAsia. “Going forward, Singapore’s economy is likely to see weak growth rates of 1-ish per cent and that is nothing to be happy about.”

The souring economic picture seems to have put a dent on household spending, noted UOB economist Francis Tan, referring to the meagre growth of 0.6 per cent in private consumption expenditure for the third quarter. That marked the slowest growth in private consumption expenditure since the sustained slowdown started in the fourth quarter of 2015, and could be a result of weaker real wage growth and less-tight labour market.

“Faced with the onset of poorer economic prospects and job market, weaker consumer confidence had resulted in a collective ‘tightening your belt’ situation amongst residents,” Mr Tan wrote in a note.

As the dark clouds continue to gather on the horizon, where is the economy headed?

Q: Are we about to enter a technical recession?

Over the July to September quarter, the city-state’s economy shrank 2 per cent from the previous three months on an annualised and seasonally adjusted basis. Another quarter-on-quarter contraction in the final three months of 2016 would put Singapore in a technical recession.

In response to media queries, the MTI on Thursday said the likelihood of a technical recession in the upcoming quarter is “unlikely”, with growth support coming from electronics, IT and other services industries.

However, economists are split when it comes to how Singapore’s economy will fare in the fourth quarter.

HSBC’s Joseph Incalcaterra, for one, expects a technical rebound in sequential growth in the final quarter, primarily due to relief from a favourable base effect. Meanwhile, Ms Tan from Capital Economics put the odds of a technical recession next quarter at “less than 50 per cent”.

“It’s not our base case scenario at this point,” she said. “There are signs that the economy may be stabilising, such as loan growth and the manufacturing sector did end the third quarter on a stronger note after improvements in September. Also, broadly speaking, we don’t see global growth collapsing.”

Nonetheless, there are economists who are taking a more cautious stance.

Citigroup’s Kit Wei Zheng said that a fourth-quarter technical recession “cannot be ruled out” after indicators, such as the 12 per cent year-on-year plunge in October’s non-oil domestic exports, indicated that economic weakness has persisted into the fourth quarter.

Mr Rajiv Biswas, the chief economist for Asia Pacific at IHS Global Insight, said there is a 30 per cent chance that the Singapore economy could see another quarter-on-quarter contraction. The sustainability of manufacturing growth and whether the services sector could pull itself out of the rut following three straight quarters of sequential contraction will be key factors, he added.

“However, even if Singapore does avert a technical recession, the momentum of economic growth in the first three quarters has been very close to what may be described as economic stagnation even though it was not a technical recession,” he said.

Q: Going into 2017, what are the prospects for the Singapore economy?

The MTI on Thursday described the economy’s growth outlook for 2017 as “modest”, while adding that it expects GDP to come in between 1 to 3 per cent.

Similarly, many economists said that downside risks to growth remain high moving forward.

HSBC’s Joseph Incalcaterra expects most sectors in Singapore to see a “deceleration in activity” into next year, setting the stage for weak growth in 2017. “Momentum in the Singapore economy continues to decelerate alongside weakening global trade, and we see downside risks on the horizon stemming from policy uncertainty in the US and European Union.”

Citi’s Mr Kit is more pessimistic. “For 2017, we remain wary of competitiveness drags on exports, tighter credit conditions for companies, and a weakening jobs market weighing on household balance sheets, which could bring growth below 1 per cent,” he wrote in a note.

According to economists that Channel NewsAsia spoke to, estimates for 2017 full-year GDP growth range from 0.9 per cent to 1.8 per cent.


US President-elect Donald Trump, who campaigned on a protectionist stance, is seen as a further risk to Singapore’s economy. (Photo: AFP/Mandel Ngan)

Q: Donald Trump – the key risk factor to watch out for?

Apart from longstanding headwinds such as weak external demand and a slowdown in major trading partner China that has dampened the fortunes of Singapore’s trade-reliant economy, uncertainties have been intensified in recent months due to shocks stemming from Brexit and the victory of American mogul Donald Trump.

Commenting on what a Trump administration means for Singapore, Mr Biswas said that if the President-elect’s policies such as cutting corporate tax rates can boost US GDP growth in the near term, Singapore’s export-driven economy will inevitably get a lift.

However, significant uncertainties about Trump’s other policies remain. “One downside risk could be if the US applies significant countervailing tariff measures against key Asian economies such as China. If China is hit by significant US defensive countervailing tariff measures to combat perceived unfair trade practices, it could result in a further slowdown in China’s export sector, which could have negative transmission effects on Singapore’s economy,” Mr Biswas explained.

An added risk could come in the form of faster-than-expected interest-rate hikes by the US Federal Reserve, alongside Trump’s policies to boost fiscal spending.

With domestic interest rates in Singapore being tied closely to US rates, quicker hikes by the Fed will likely increase debt servicing burdens, while negatively impacting the housing market as well as construction activities. These impact will be unwelcomed at a time when Singapore’s economic growth is already faltering, said Ms Tan from Capital Economics. 

Follow See Kit on Twitter @SeeKitCNA

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Malaysian economy expands 4.3% in Q3

KUALA LUMPUR: Malaysia’s economy expanded by 4.3 per cent compared to a year ago, ending five consecutive quarters of decelerating growth, the country’s central bank announced on Friday (Nov 11).

In a briefing for the media, Bank Negara said that growth in major economic sectors was “in line with domestic demand”. Sectors that expanded during the quarter included services (6.1 per cent) manufacturing (4.2 per cent), mining (3.6 per cent) and construction (7.9 per cent). However, the agricultural sector shrunk significantly by 5.9 per cent. 

Domestic demand excluding stocks grew by 4.7 per cent in the third quarter compared to the same period a year ago. Net exports of goods and services also increased by 5.9 per cent, with a 1.3 per cent decrease in exports offset by a larger 2.3 per cent fall in imports during the quarter.

Private sector expenditure grew 6 per cent, with private consumption increasing by 6.4 per cent and private investment by 4.7 per cent.

The higher consumption in the private sector was supported by continued wage and employment growth, and driven mainly by capital spending in the services and manufacturing sectors, according to the central bank. 

In comparison, public sector expenditure edged up only slightly by 0.3 per cent, with a 3.1 per cent increase in public sector consumption negated by a 3.8 per cent plunge in public sector investment. 

Stock prices in the quarter fell by 1.6 per cent year-on-year. 

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Singapore's manufacturing economy shrinks for 13th straight month

SINGAPORE: The Republic’s manufacturing economy shrank for the 13th straight month, according to the figures from the Singapore Institute of Purchasing & Materials Management (SIPMM) on Tuesday (Aug 2).

The July reading for the Singapore Purchasing Managers’ Index (PMI) came in at 49.3, down 0.3 point from the previous month. This was mainly due to lower new orders and new exports.

A reading above 50 indicates that the manufacturing economy is expanding, while a reading below 50 generally means a decline.

Meanwhile, the electronics PMI showed a slowing rate of contraction, up 0.7 point from the previous month to 49.7.

One economist said the regional manufacturing outlook appears to be mixed as external demand continues to weigh on the region.

“China is actually a good leading indicator, given our economic relationship,” said Mr Edward Lee, regional head of research for Southeast Asia at Standard Chartered Bank. “It has been above 50 but not hugely above 50. Recently, it dipped below 50 again for its manufacturing PMI, suggesting that the overall economic demand, economic activity remains just at about the 50 sort of level. So not very strong at all and more on the weak side actually. I think this is a reflection of global demand.”

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