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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MAS says no change to monetary policy, in line with expectations

SINGAPORE: The Monetary Authority of Singapore (MAS) kept its exchange rate-based monetary policy unchanged at its semi-annual review on Thursday (Apr 13), in line with expectations.

In a statement, the central bank said it would maintain the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$ NEER) policy band at zero per cent. The width of the policy band and the level at which it is centred will also be unchanged, it added.

“A neutral policy stance is appropriate for an extended period and should ensure medium-term price stability,” said MAS, reiterating a stance it first mentioned in its policy review last October.

Following the announcement, the Singapore dollar fluctuated between 1.3976 and 1.3956 against the US dollar.

The central bank noted that the Singapore economy will continue to expand at a “modest pace” this year while the MAS core inflation measure, which excludes accommodation and private road transport costs, will rise gradually on the back of higher global oil prices.

However, demand-driven inflationary pressures will likely be restrained, the statement added. Over the medium term, core inflation – a key policy consideration for the MAS – is expected to trend towards but average slightly below 2 per cent.

Given the “subdued outlook for growth and inflation”, its current neutral policy stance is “assessed to be appropriate”, MAS said.


Analysts have largely expected the central bank, which manages the economy through the currency rather than setting interest rates, to maintain its current policy approach amid an uneven turnaround in the economy. The MAS allows the exchange rate to float within an unspecified policy band and changes the slope, width and centre of that band when it wants to adjust the pace of appreciation or depreciation of the Sing dollar.

Said Mizuho Bank’s senior economist Vishnu Varathan: “Despite a pick-up in manufacturing and exports, it has been uneven. As mentioned in its statement, it sees lingering lethargy in domestic sectors like services.”

He added: “Another reason is that global uncertainty remains high, with geopolitics being thrown into the mix now. They don’t know what will happen so they will not jump the gun for now.”

Advance estimates released by the Ministry of Trade and Industry (MTI) on Thursday showed first-quarter gross domestic product (GDP) grew at 2.5 per cent year-on-year, easing from 2.9 per cent in the previous quarter, as the manufacturing sector moderated its pace of expansion.

With the MAS reiterating the view that its neutral policy stance is “appropriate for an extended period”, Maybank Kim Eng economist Chua Hak Bin thinks the central bank could stand pat yet again at its next policy review six months later, barring any surprise spikes in inflation or GDP growth.

“We were looking out for the phase ‘extended period’ to be dropped but they’ve maintained that in the statement so it seems to suggest that come October, the MAS may keep its policy stance,” said Dr Chua. The local labour market remains weak and inflation, both headline and core, remains stuck at the lower end of MAS’ forecast range, he added.

Westpac’s currency strategist Sean Callow echoed that sentiment, noting that “those hoping for a hawkish hint for October are likely to be disappointed”.

“There had been some market discussion over whether there would be any hint of a return to modest SGD appreciation from October 2017. There was not,” Mr Callow said. “Six months might seem a long time in (forex) markets but the MAS appears not to expect much to have changed by the next meeting.

Last April, the central bank unexpectedly flattened the slope of the band it uses to guide the local currency against an undisclosed trading basket, reducing the rate of appreciation to zero per cent.

The MAS maintained this stance last October and reiterated in February that the Government’s growth forecast of between 1 and 3 per cent this year falls within the “planning parameters” of its October monetary policy statement.

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OCBC posts 5% jump in Q3 profit, beating expectations

SINGAPORE: The Oversea-Chinese Banking Corp (OCBC) beat estimates with a 5 per cent rise in quarterly profit in the third quarter of the year, helped by gains from its insurance and wealth management units, according to its financial results released on Thursday (Oct 27).

However, the bank warned of a challenging operating environment. The city-state’s lenders must contend with growing risks to earnings as credit woes deepen for the offshore services sector, which has been hit hard by a drop-off in orders due to a near-two year rout in oil prices until early this year.

Net profit for Singapore’s second-biggest bank came in at S$ 943 million in the third quarter as its insurance and wealth management business powered a 25 per cent climb in non-interest income.

The result handily beat expectations for a decline in profit with the average estimate at S$ 834 million from five analysts polled by Reuters.

But provisions for bad debt jumped almost 11 per cent to S$ 166 million, while net interest income dropped 6 per cent due to lower loan volumes and a weaker net interest margin.

“We continue to keep a firm grip on cost, maintain strong liquidity and capital, and ensure prudent levels of provisioning,” OCBC Chief Executive Samuel Tsien said in a statement.

Offshore firms that have said they are struggling with debt payments include oilfield services company Swiber Holdings, which was placed under judicial management this month.

Signs of weakness in a trade-dependent economy and the domestic property market are also further squeezing loan demand.  

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