SINGAPORE - Singapore's economy expanded 1.3 per cent in the first quarter of 2019, slipping further from its weakest quarter of growth in three years as manufacturing contracted.
The flash estimates released by the Ministry of Trade and Industry (MTI) on Friday (April 12) came in slightly under expectations of 1.4 per cent growth by analysts polled by Bloomberg.
DBS senior economist Irvin Seah noted that this marks the weakest year-on-year quarterly growth since the second quarter of 2009 – during the global financial crisis.
But he stressed that “the economy is far from a recession” and that the current flash figures likely reflect a temporary phenomenon.
The sub-par number was partly due to a high base of comparison during the same period last year, as well as risk-averse behaviour of manufacturers who cut back on buying at the height of trade tensions between the United States and China.
He added that recessions are either marked by two consecutive quarters of economic decline – a technical recession – or a full-year growth figure that is in the negative region.
Singapore has not seen such negative growth, said Mr Seah, who added that the economy has likely hit the bottom of the current growth cycle, with potential for significantly stronger performance in second half of the year.
“Given previous risk-averse behaviour, we’ll see a restocking coming up and this will give some near-term boost,” he told The Straits Times. “Very supportive measures from China and central banks around the world will also take effect as early as in the second quarter onwards. This will definitely lift the figure significantly.”
There are already early signs of improvement.
While year-on-year growth was sluggish, preliminary numbers for the first three months of this year suggest an improvement from last quarter, being up 2 per cent quarter on quarter. This was faster than the 1.4 per cent growth in the previous quarter, on a seasonally adjusted annualised basis.
Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said: “First quarter was below our expectations of 1.8 per cent year on year, mainly because the manufacturing contraction was worse than expected.”
The manufacturing sector shrank 1.9 per cent compared to the same period last year, in a reversal from the 5.1 per cent growth in the previous quarter.
This was weighed down by output declines in the precision engineering and electronics clusters, which more than offset output expansions in the biomedical manufacturing and transport engineering clusters, said MTI on Friday.
But Ms Ling added: “With the modest uptick in domestic manufacturing and electronics Purchasing Managers’ Index (a much-watched indicator of industrial activity) in March, we may see some stabilisation ahead.”
Economic growth in the first quarter was lifted by the services producing industries, where the pace of expansion picked up to 2.1 per cent compared to the same period last year, up from 1.8 per cent in the fourth quarter of 2018.
Growth was primarily supported by the information and communications, as well as business services sectors, said the MTI.
The construction sector grew by 1.4 per cent year on year as well, in a turnaround from the 1 per cent decline previously. It was the first quarter of positive growth after 10 consecutive quarters of decline and the recovery was supported by an improvement in private sector construction activities.
ING economist for Asia Prakash Sakpal cautioned that despite these improvements, there remain some uncertainties as Singapore is heavily dependent on exports amid global trade tensions and an electronics slowdown.
“If these risks intensify further going forward, we may see a further hit to growth,” he said.
Ms Ling pointed out as well that construction remains unlikely to be a key driver of growth and that the uptick in services momentum, while providing a buffer, is still less than half the pace this time last year.
“Until we see a bottom and improvement in the China and global growth prospects, the overall picture for the Singapore economy remains cautious,” she said.
For the whole of last year, Singapore’s economy grew by 3.2 per cent and for 2019, MTI expects gross domestic product growth to be slightly below the mid-point of its forecast range of 1.5 per cent to 3.5 per cent.
The ministry will release further information in its Economic Survey of Singapore in May.