Third quarter growth of 5.1 per cent beats expectations

PHOTO: Third quarter growth of 5.1 per cent beats expectations

Singapore's economy has outperformed for the second quarter in a row, thanks to a gradual recovery in manufacturing and continued expansion in services.

Growth was a better-than-expected 5.1 per cent for the third quarter compared with a year ago, based on the advance estimates released by the Ministry of Trade and Industry (MTI) on Monday.

MTI also revised upwards the second quarter's growth to 4.2 per cent, which means that the Singapore economy has expanded 3.2 per cent in the first nine months. This spells good news for the economy as that figure is near the upper end of the forecast full- year growth range of between 2.5 and 3.5 per cent.

The Monetary Authority of Singapore said next year's growth numbers will be similar.

Although the economy grew more than expected in the third quarter over a year ago, it shrank 1 per cent compared with the second quarter.

This "should not be a red flag", said OCBC economist Selena Ling, noting that third-quarter growth came from a broader base than in the first half of the year.

In particular, the tepid manufacturing sector appears to be gaining momentum. It grew 4.5 per cent in the third quarter from a year ago, more than three times the pace in the preceding quarter.

Growth was mainly supported by the transport engineering and electronics clusters, said the MTI.

Services remained the economy's powerhouse. It grew 5.7 per cent in the third quarter over last year on more activity in finance and insurance, wholesale and retail trade.

But higher business costs and the labour crunch are affecting the sector's performance, said DBS economist Irvin Seah.

The one key sector that lagged was construction, growing 3.6 per cent over last year - half the second quarter's rate - due to a decline in public sector works.

While all sectors grew from a year ago, manufacturing and construction shrank compared with the second quarter, MTI said.

Still, Monday's strong data led economists such as ANZ's Daniel Wilson and Bank of America Merrill Lynch's Chua Hak Bin to upgrade growth forecasts for the year. Both are tipping full-year growth of 3.5 per cent.

The latest numbers show Singapore is "staging a robust recovery", following concerns earlier this year that the economy might shrink, said Dr Chua. Mr Wilson expects the momentum to continue, tipping 4 per cent growth in each of the next two quarters from the year before.

The revival of major economies such as the US, Europe, Japan and China will likely mitigate ongoing fiscal and monetary uncertainties in the US, added OCBC's Ms Ling.

Mr Victor Tay, chief operating officer of the Singapore Business Federation, said the manufacturing sector's stronger showing in the third quarter reflects more upbeat business sentiment.

But firms continue to struggle with escalating costs, he said.

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