Economists split over prospects for broader economy

Office workers crossing the road in the central business district.
Office workers crossing the road in the central business district. PHOTO: ST FILE

A more robust global economy has been the main driver behind Singapore's stronger growth this year, especially in trade-dependent sectors like manufacturing.

But the pickup in activity has been concentrated in a few sectors, and economists are divided over whether it will lift the rest of the economy and the job market.

A quarterly survey released yesterday by the Monetary Authority of Singapore showed that private sector economists are more upbeat about the economy this year. Growth is expected to come in at 2.5 per cent, up from the 2.3 per cent forecast in the previous survey. The more sanguine outlook is driven largely by the manufacturing sector - in particular, electronics manufacturing - which has surged in this half of the year on the back of rising global demand for semiconductors and related equipment.

Maybank Kim Eng economist Chua Hak Bin noted that while the recovery has been led by electronics manufacturing and trade-related services, it is likely to broaden out to other segments, including financial services, business services, and wholesale and retail trade. "Even if manufacturing growth moderates from the breakneck pace seen in the early part of this year, other growth drivers should start kicking in," added Dr Chua, who expects the economy to expand 3 per cent this year.

United Overseas Bank economist Francis Tan, however, said: "The momentum from manufacturing is likely to slow - the fast growth in the first half of the year is not sustainable. Growth was very manufacturing-driven and other sectors have not felt much of a pickup. The service sector is still experiencing slow growth, and it is the largest employer."

He expects the economy to expand 2.4 per cent this year.

The labour market outlook remains far from rosy, even though it is showing tentative signs of benefiting from this stronger growth. Figures released this week by the Manpower Ministry showed the number of workers laid off in the first quarter fell to the lowest level in over a year.

There were about 4,000 retrenchments, below the ministry's initial estimates of 4,800 and far lower than the 5,440 laid off in the final quarter of last year. But some laid-off workers were having a hard time finding new jobs amid ongoing restructuring.

"The labour market is expected to still be weak this year because of deeper structural issues," said Mr Tan. "A much stronger increase in cyclical demand would be needed to give it a lift."

A version of this article appeared in the print edition of The Straits Times on June 15, 2017, with the headline 'Economists split over prospects for broader economy'. Print Edition | Subscribe