Economists predict slower growth in second quarter

Local economists think struggling factories, flagging world trade and sluggish tourist arrivals continued to drag down economic growth in the second quarter.
Local economists think struggling factories, flagging world trade and sluggish tourist arrivals continued to drag down economic growth in the second quarter. ST PHOTO: LIM YAOHUI

Local economists think struggling factories, flagging world trade and sluggish tourist arrivals continued to drag down economic growth in the second quarter.

Their views come ahead of official advance estimates - which will take into account data from the first two months of the quarter - to be released tomorrow.

Tepid global growth continues to weigh on the manufacturing industry here, which contracted 5.8 per cent over April and May compared with the same period a year ago.

Even if there had been a slight pick-up in June, the sector is still likely to have shrunk 3 per cent over the quarter, compared with the corresponding period last year, said UOB economist Francis Tan. This would come after a 2.7 per cent first-quarter fall and bring the manufacturing sector to its third consecutive quarter of falling output.

Mr Tan expects the economy to have expanded 1.8 per cent in the second quarter, significantly slower than the 2.6 per cent logged in the first three months of the year.

Service industries such as food and beverage, hospitality and retail did not fare any better, given lacklustre tourist arrivals, said OCBC economist Selena Ling. International tourist arrivals declined 5.4 per cent from January to April over the same period a year ago.

"We don't expect any particular sector to outperform," said Ms Ling, who is forecasting second-quarter growth of 1.4 per cent.

Despite the doom and gloom, economists say the economy likely bottomed out in the second quarter. Ms Ling remains optimistic of a pick-up in this half of the year, despite events in Greece and China.

"Indicators suggest any potential contagion in Greece will be fairly muted," she said. While it remains to be seen how the recent equity-market rout in China will impact real economic activity, Ms Ling noted that Singapore has already been feeling the impact of a decelerating Chinese economy for some time.

DBS economist Irvin Seah said manufacturing is likely to remain the weakest link in the coming months, with a confluence of factors weighing on the sector.

Shipments to Singapore's top three export markets - the United States, the euro zone and China - have yet to pick up decisively. The economic turmoil in Greece could prove protracted, and China's slowdown could have a lasting impact on Singapore, said Mr Seah.

"Absent a stronger recovery in the United States, the outlook for Singapore manufacturing is more half empty than half full," he added.

Mr Seah has revised his expectations for full-year economic growth from 3.2 per cent to 2.4 per cent - the slowest rate in six years.

"Interest rate expectations will swing and currencies will be volatile, given the risks in the global economy... Domestic restructuring and the resulting labour shortage will weigh on growth."

A version of this article appeared in the print edition of The Straits Times on July 13, 2015, with the headline 'Economists predict slower growth in second quarter'. Print Edition | Subscribe