Manufacturing helps power growth of 2% last year

Data out yesterday showed the economy grew 2 per cent last year, slightly stronger than earlier estimates of 1.8 per cent. The better showing was mainly driven by a year-end turnaround in manufacturing, which makes up one-fifth of the economy.
Data out yesterday showed the economy grew 2 per cent last year, slightly stronger than earlier estimates of 1.8 per cent. The better showing was mainly driven by a year-end turnaround in manufacturing, which makes up one-fifth of the economy. PHOTO: ST FILE

Some economists raise growth forecasts for 2017, but global protectionist risks remain

Brighter prospects for manufacturing reflected in new official data have prompted some economists to raise their forecasts for Singapore's economic growth this year.

But the outlook is not cheery across the board, analysts say. Other sectors are still stuck in the slow lane and a host of risks remain, including mounting geopolitical uncertainty and lacklustre sentiment.

Even as the outlook improves for some key trading partners - including the United States - a slowing China and a rising tide of protectionist sentiment globally could weigh on growth this year, the Ministry of Trade and Industry (MTI) said.

Data out yesterday showed the economy grew 2 per cent last year, slightly stronger than earlier estimates of 1.8 per cent - and marginally up from 2015's 1.9 per cent.

The better showing was mainly driven by a year-end turnaround in manufacturing, which makes up one-fifth of the economy.

The sector grew 3.6 per cent last year, a significant reversal from a 5.1 per cent slide in 2015 - due in part to a final-quarter surge in electronics and biomedical output.

The momentum is set to roll into this year, "supported by a continued recovery in the global demand for semiconductors and semiconductor equipment", said MTI Permanent Secretary Loh Khum Yean.

This was backed by robust export growth recently. Singapore's non- oil domestic exports expanded 8.6 per cent last month over the same month a year ago after healthy growth in preceding months.

"We think that Singapore's exports will continue to recover in 2017, benefiting from the stronger global growth, (especially) from a pick-up in global electronics demand," said Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye.

But the outlook elsewhere in the economy is less sanguine. The construction sector has seen a drop in contracts awarded in the past two years, largely owing to sluggish private sector demand, Mr Loh said.

Growth in the service sector - making up two-thirds of the economy - also moderated last year.

While global growth is expected to pick up, "if protectionist approaches become the norm, global trade will be adversely affected with knock-on effects on economic growth worldwide", Mr Loh added.

MTI maintained its forecast for the economy to grow at a "modest" 1 per cent to 3 per cent this year.

Yesterday's data prompted some economists to revise their economic growth forecasts upwards.

DBS economist Irvin Seah now expects full-year growth of "close to 3 per cent", up from an earlier estimate of 1.3 per cent. Pockets of "exceptionally strong growth" in certain sectors are contributing to the better outlook, he said.

But OCBC's Selena Ling is sticking with her forecast of 1 per cent to 2 per cent growth, given uncertainties over the Trump adminis- tration's trade policy.

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A version of this article appeared in the print edition of The Straits Times on February 18, 2017, with the headline 'Manufacturing helps power growth of 2% last year'. Print Edition | Subscribe