MTI narrows 2017 growth forecast range to 2-3%

An employee works on solar panels on the module production line at the REC Solar ASA manufacturing facility at Tuas.
An employee works on solar panels on the module production line at the REC Solar ASA manufacturing facility at Tuas.PHOTO: ST FILE

Economy grows 2.9% in second quarter as pick-up in global trade boosts more sectors

The Singapore economy is on a stronger footing this year with tentative signs emerging that the pick-up in trade is lifting more sectors, as the Ministry of Trade and Industry (MTI) yesterday narrowed its forecast range for economic growth this year to 2 per cent to 3 per cent, from an earlier estimate of 1 per cent to 3 per cent.

It announced this alongside the release of the latest Economic Survey of Singapore, which showed the economy expanded 2.9 per cent in the April to June quarter compared with the same period a year earlier.

This was faster than the 2.5 per cent growth in the preceding quarter and also an upward revision from an earlier 2.5 per cent estimate.

Trade agency IE Singapore yesterday also narrowed its forecast range for non-oil domestic exports, which are now expected to increase 5 per cent to 6 per cent this year from a previous estimate of 4 per cent to 6 per cent.

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MTI expects full-year economic growth of around 2.5 per cent.

Growth in the second quarter was driven mainly by the surging manufacturing sector, which grew at a robust 8.1 per cent year on year.

Strong global demand for electronics - in particular, semiconductors - since the fourth quarter of last year has given Singapore's manufacturing sector a shot in the arm.

Some segments of services also showed signs of recovery. The sector, making up two-thirds of the economy, expanded 2.4 per cent in the second quarter - its strongest pace of growth in almost two years.

The improvement was driven by more robust expansion in a number of segments, including finance and insurance as well as transportation and storage, which got a lift from higher container throughput and sea cargo handled at ports here.

Accommodation and food services, however, contracted for the third straight quarter, while construction also remained weak.

MTI sounded a more upbeat note about the economic outlook, but also cautioned that growth remains patchy and concentrated in sectors which have benefited from the pick-up in global trade. These sectors - including manufacturing, transportation and storage, and wholesale trade - are expected to continue supporting growth in this half of the year, Permanent Secretary for Trade and Industry Loh Khum Yean said at a briefing yesterday.

Risks remain - such as anti-globalisation sentiment, faster than expected tightening of US monetary policy and a steeper-than-intended pullback of credit in China.

But their potential to have a significant impact on global growth this year has eased compared with three months ago, Mr Loh noted.

UOB economist Francis Tan said the second quarter's number was likely the highest quarterly growth rate Singapore will see this year, partly because manufacturing is set to grow at a slower pace in the coming months, given base effects.

Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye said the trade-led recovery is broadening out to the domestic economy.

"Some of the more 'domestic' sectors... (including) retail trade and the property sector are seeing an uplift," they added. "Growth is broadening to services, which will help offset the moderation in manufacturing growth in the second half."

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A version of this article appeared in the print edition of The Straits Times on August 12, 2017, with the headline 'MTI narrows 2017 growth forecast range to 2-3%'. Print Edition | Subscribe