Singapore's stronger Q4 GDP masks underlying weakness, fails to temper easing risk

SINGAPORE - Singapore's economy grew faster than initially estimated in the fourth quarter, but a deeper contraction in the key manufacturing sector and a downgrade to trade growth for this year will keep pressure on policy makers to step up stimulus.

Solid growth in the services industry helped lift gross domestic product (GDP) to an annualised 6.2 per cent in October-December period from the previous three months on a seasonally adjusted basis, the Ministry of Trade and Industry said on Wednesday.

That was stronger than the government's advance estimate of 5.7 per cent growth issued in January and topped the median forecast of a 4.0 per cent rise in a Reuters survey.

In the third quarter, the economy grew 2.3 per cent.

"For now, we are in the no-change camp but softer inflation and growth dynamics obviously do continue to tilt the dial towards potentially policy stimulus - whether it comes from monetary side or fiscal side," said Selena Ling, head of treasury research and strategy for OCBC Bank.

Singapore's economy and several other trade-reliant regional countries have been hit hard by cooling growth in China and a general downturn in global demand, and analysts say the deteriorating outlook may prompt the city state's central bank to ease monetary policy at its scheduled review in April.

Jacqueline Loh, deputy managing director for the Monetary Authority of Singapore, told reporters that the current monetary policy stance remains appropriate and will be next reviewed in April.

The pressure for more stimulus, however, could grow given the weakened state of the manufacturing sector, with the trade agency downgrading this year's forecast for total merchandise trade to between -1.0 per cent and 1.0 per cent, from the previous projection of nil to 2.0 per cent growth.

Full-year GDP growth in 2015 was revised down to 2.0 per cent from the initial estimate of 2.1 per cent - the worst showing since 2009 when the economy contracted 0.6 per cent due to the global financial crisis.

The city-state's manufacturing sector contracted a revised 4.9 per cent in the fourth quarter, more than the 3.1 per cent fall estimated earlier, as weak global demand took a heavy toll on exporters.

The service sector helped to prop up the final GDP number, growing an annualised 7.7 per cent from the previous three months on a seasonally adjusted basis, higher than the initial 6.5 per cent growth estimate.

The ministry maintained its forecast for this year's growth at 1.0-3.0 per cent.

Against a backdrop of low inflation and tepid global growth, the MAS eased monetary policy twice last year, including one unscheduled easing in January.