Singapore economy stays in slow lane, with more bumps ahead

Singapore economy stays in slow lane, with more bumps ahead

Singapore's already-bruised economy faces another difficult year ahead, especially if rising opposition to globalisation impacts international trade.

The Ministry of Trade and Industry (MTI) said the country will likely avoid a technical recession this year, but growth will remain slow, and 2017 will bring its challenges.

The ministry yesterday narrowed its growth forecast for 2016, now tipping growth of 1 per cent to 1.5 per cent for the full year, from an earlier estimate of 1 per cent to 2 per cent.

This updated forecast came as the MTI's latest Economic Survey of Singapore showed that the economy expanded 1.1 per cent in the third quarter from the corresponding period a year ago - up from earlier estimates of 0.6 per cent growth.

Compared with the preceding three months, the economy shrank 2 per cent in the July to September quarter. If output contracts again in this quarter, Singapore would enter a technical recession - defined as two consecutive quarters of decline in economic output.

But official forecasters think this is unlikely, said MTI Permanent Secretary Loh Khum Yean.

"MTI's view is that the Singapore economy should avoid a technical recession in the fourth quarter. Growth in the fourth quarter will be modest, supported by sectors such as electronics, and information and communications," he said.

Mr Loh noted that the growth outlook remains "modest". MTI expects the economy to expand between 1 per cent and 3 per cent in 2017. The United States is likely to grow at a faster pace, while key regional economies will also remain resilient.

However, risks like rising corporate debt in China and uncertainties over the timing and nature of Britain's exit from the European Union could weigh on prospects.

Mr Loh also flagged mounting "pushback against globalisation" around the world, which could further dampen global trade.

This trend is already hurting Singapore. Trade agency IE Singapore expects non-oil domestic exports (Nodx) to shrink 5 per cent to 5.5 per cent this year - a larger contraction than the 3 per cent to 4 per cent decline previously forecast. Nodx fell 5.4 per cent in the third quarter over a year ago.

DBS economist Irvin Seah, who forecasts growth of 1.3 per cent in 2017, pointed to a silver lining. "We are seeing tentative signs that things might be bottoming out, especially for the manufacturing sector. With oil prices bottoming, we might get less of a drag from the oil and gas cluster in the coming year."

The manufacturing sector, which makes up a fifth of the economy, has been showing gradual signs of recovery and performed better than expected, contributing to the upward revision in third quarter growth figures.

Read also: Slowdown has already taken a toll on workers and businesses

Service exports set to be bigger part of economic pie

This article was first published on November 25, 2016.
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