Brighter picture for 2020 after muted growth last year

Economists are more optimistic for this year, and the Ministry of Trade and Industry has forecast 0.5 per cent to 2.5 per cent growth.
Economists are more optimistic for this year, and the Ministry of Trade and Industry has forecast 0.5 per cent to 2.5 per cent growth.PHOTO: REUTERS

Economy grew by 0.7% in 2019; services to be growth pillar this year

Singapore's economic growth was muted last year, with modest expansion recorded in the fourth quarter, but the growth picture looks to be brighter this year.

The manufacturing sector is likely to see slow recovery in the year ahead, and the service sector is likely to be a stable pillar of growth for Singapore, said economists.

The economy grew 0.7 per cent last year, the slowest in a decade and down from 2018's 3.1 per cent, according to flash estimates released by the Ministry of Trade and Industry (MTI) yesterday.

This was within the 0.5 per cent to 1 per cent forecast by MTI in November and slightly better than the 0.6 per cent uptick predicted by analysts polled by Bloomberg.

Singapore's economy expanded 0.8 per cent year on year in the fourth quarter, up slightly from the revised 0.7 per cent growth in the previous quarter.

OCBC Bank's head of treasury research and strategy Selena Ling said the flash estimates confirm that the Singapore economy bottomed in the second quarter of last year.

While last year's figures are the weakest since 2009, when Singapore's economy recorded 0.1 per cent year-on-year growth, she said there are positives to take from a "glass half-full perspective".

"We avoided a technical recession, which was one of the fears (after the soft second-quarter figures), and we avoided a full-year recession, so the worst-case scenarios did not come true," said Ms Ling.

Economists are more optimistic for this year, and MTI has forecast 0.5 per cent to 2.5 per cent growth.

DBS senior economist Irvin Seah said: "Barring any unforeseen negative shocks, growth momentum is expected to pick up gradually in the coming quarters."

Manufacturing contracted 2.1 per cent year on year in the fourth quarter, steeper than the 0.9 per cent dip in the previous quarter.

This was due to output declines in the electronics, chemicals and transport engineering clusters, which more than offset expansions in the precision engineering, biomedical manufacturing and general manufacturing clusters, MTI said.

  • 0.7%

    How much the economy grew last year, the slowest in a decade.

    3.1%

    How much the economy grew in 2018.

Maybank Kim Eng senior economist Chua Hak Bin said that factory output is likely to have hit its trough in the fourth quarter. "Manufacturing should emerge from its recession in 2020, which will be a big plus to the overall economy," he said.

Mr Seah said that the service sector continued to pick up the slack from the slumping manufacturing sector in the fourth quarter.

Service-producing industries expanded by 1.4 per cent year on year in the fourth quarter, compared with the 0.9 per cent expansion in the previous quarter. This was primarily supported by the finance and insurance sector, as well as the business services segment.

Noting that the service sector accounts for about two-thirds of the economy, Mr Seah added: "Further improvement in this cluster will be instrumental in lifting the overall economic performance."

Economists expect a generous Budget to be announced next month, after Prime Minister Lee Hsien Loong said in his New Year message that it will have measures to help businesses, workers, families and other vulnerable groups.

 
 
 
 

Ms Ling said that the Budget should provide more support for businesses to raise productivity as well as skills training for workers, and shore up domestic consumer confidence, which could help boost economic growth this year.

External headwinds will remain strong this year, Mr Seah noted, and an improvement in the global economic outlook will hinge on further progress in the United States-China trade talks.

MTI will release the growth figures for the fourth quarter and the whole of last year, including performance by sectors, sources of growth, inflation, employment and productivity, next month.

A version of this article appeared in the print edition of The Straits Times on January 03, 2020, with the headline 'Brighter picture for 2020 after muted growth last year'. Print Edition | Subscribe