The Singapore economy dusted off the holiday blues, handily avoiding a technical recession with a surprisingly healthy set of numbers for the fourth quarter.
Advance estimates from the Ministry of Trade and Industry showed that the economy expanded 1.8 per cent in the last three months of the year, mainly due to a stellar rebound in manufacturing.
This was the fastest pace of growth in more than three years and easily beat analyst expectations of a 0.3 per cent rise for the quarter. The economy surged 9.1 per cent compared with the third quarter.
The robust fourth quarter lifted full-year gross domestic product (GDP) growth to 1.8 per cent, well above the Government's forecast of a 1 per cent to 1.5 per cent expansion.
The outperformer last quarter was manufacturing, which gained 6.5 per cent from the same period a year earlier, on the back of strong expansion in electronics and biomedical engineering.
OCBC Bank economist Selena Ling noted that this was manu- facturing's best quarter since early 2014.
"The tide is gradually turning for 2017, with the long-awaited domestic manufacturing recovery finally taking root," she said, adding that manufacturing grew 2.3 per cent for the whole of last year, after contracting 5.2 per cent in 2015.
Manufacturing's rebound was reinforced by the Purchasing Managers' Index, a measure of factory activity, which yesterday showed a fourth straight month of increase, thanks to higher factory output, inventory holding, new orders and new exports.
Meanwhile, the service sector grew 0.6 per cent, while construction continued to shrink, falling 2.8 per cent from the same period in 2015.
United Overseas Bank's (UOB's) global economics team noted that the recovery in manufacturing provides a basis for some tentative optimism, but warned that many more challenges lie ahead.
"Looking ahead, we... posit that headwinds in 2017 include slower nominal wage growth, slower employment gains, higher interest rates and uncertainties from a new Trump administration in the United States."
Amid this sobering outlook, the Government has forecast growth of 1 per cent to 3 per cent for this year, with UOB predicting an expansion of 1.8 per cent.
Singapore Business Federation (SBF) chief executive Ho Meng Kit said the latest set of GDP figures was "a pleasant surprise", but noted that the SBF's latest survey of members, released last week, showed that sentiment among companies remains subdued.
"Nearly two-thirds, or 63 per cent, of businesses say that the economic climate in Singapore has worsened in 2016, and nearly half - 48 per cent - of businesses expect the situation to deteriorate in 2017," he said.