Singapore GDP grew 1.8% in Q1, slightly better than expected

Singapore GDP grew 1.8% in Q1, slightly better than expected

Singapore's gross domestic product (GDP) expanded 1.8 per cent on-year during the January-March period, the same pace as the previous quarter.

That was slightly better than consensus expectations; a Reuters poll of economists had predicted a 1.7 per cent annual rise.

Growth was flat from the previous quarter on a seasonally-adjusted annualized basis.

The city-state's manufacturing sector was the principal culprit behind the tepid performance. The sector, which accounted for nearly 20 per cent of 2015 GDP, contracted by 2 per cent, marking a year of consecutive quarterly declines.

"The sector was primarily weighed down by a decline in the output of the transport engineering, precision engineering and electronics clusters," the government said in a release.

Thursday's report follows a recent wave of full-year growth downgrades.

Last month, private economists polled by the Monetary Authority of Singapore (MAS), the city-state's central bank, lowered their 2016 GDP forecast to 1.9 per cent, down from a previous forecast of 2.2 per cent in December and below last year's reading of 2 per cent.

2015 saw the city-state expand 2 per cent on-year, the weakest pace of growth since 2009.

Policy outlook

Separately, MAS announced a slight change to its principal policy management tool at its scheduled review on Thursday.

Instead of interest rates, MAS focuses on the Singapore dollar's trading band based on a basket of currencies, called the Singapore dollar nominal effective exchange rate (S$NEER). It is weighted to reflect trade levels with the city-state.

MAS said Thursday it will set the rate of appreciation of the S$NEER policy band at zero per cent but warned that the move is not aimed at depreciating the domestic currency.

Thursday's action only removes the modest and gradual appreciation path of the S$NEER policy band that was in place, it explained. The width of the policy band and the level at which it is centred will be unchanged.

"This move to a neutral policy stance of zero per cent appreciation follows the measured steps that MAS has taken to reduce the rate of appreciation of the policy band in January and October 2015 respectively," the central bank said in a statement.

Last year was a notably active year for the central bank as it allowed the Singapore dollar to rise at a "slightly" slower pace against its trading partners. MAS moved last January to counter weak inflation amid the oil price crash and again in October as a defence against domestic and external headwinds.

The central bank only officially meets twice a year: once in April and October.

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