SINGAPORE - Singapore's economy grew by 2.6 per cent in the third quarter, slowing down from the first half of the year but performing slightly better than expected, according to Ministry of Trade and Industry (MTI) advance estimates released on Friday (Oct 12).
The country's gross domestic product (GDP) grew by 4.6 per cent year on year in the first quarter, and 4.1 per cent year on year in the second quarter.
While the latest figure is still within the ministry's forecast range of 2.5 per cent to 3.5 per cent for 2018, the flash number topped the 2.4 per cent growth consensus forecast of analysts polled by Bloomberg.
On a quarter-on-quarter basis and seasonally adjusted, the economy grew 4.7 per cent in the July-September period, which MTI noted was faster than the 1.2 per cent growth in the preceding quarter.
Manufacturing grew by 4.5 per cent year on year, the numbers falling short of the more than 10 per cent growth seen in the first half of 2018.
This growth was due mainly to output expansions in the electronics, biomedical manufacturing and transport engineering clusters, said the ministry.
Meanwhile, the construction sector contracted by 3.1 per cent year on year due to weaknesses in the public sector construction projects. This was better than the 4.2 per cent decline seen in the second quarter.
The services industries grew by 2.9 per cent, matching that of the last quarter. This was supported by the finance and insurance, business services, and wholesale and retail trade sectors, said MTI.
MTI had said in August that expansion was expected to slow in the second half of the year, amid the higher risks and uncertainties in the global economy.
Economists said on Friday that the economy’s prognosis still looks good even as trade frictions and other uncertainties pose downside risks.
CIMB Private Bank economist Song Seng Wun said the slower growth in manufacturing is not surprising, since the sector is coming down from its strong performance last year.
“Other industries still maintained their momentum, including the construction sector which has seen sequential growth,” said Mr Song.
OCBC Bank head of treasury research and strategy Selina Ling, who had expected third-quarter growth to come in at 2.3 per cent, said her bank will upgrade its 2018 forecast from 3 per cent to 3.3 per cent, with the fourth quarter’s performance easing further to 2 per cent compared to the same period last year.
“For the first three quarters of 2018, the Singapore economy clocked 3.8 per cent year-on-year growth, which is the best nine-month performance since 2013,” she said.
Highlighting how the figures show the economy’s growth drivers are transitioning from manufacturing to services industries, Ms Ling said that Singapore’s growth in 2019 is far from downbeat and is tipped to expand at a pace close to potential in 2019, barring any significant setback to global growth.
Likewise, DBS Bank raised its 2018 GDP growth prediction to 3.4 per cent from 3 per cent, as a result of the past three quarters. It also raised its 2019 forecast to 3 per cent, up from 2.7 per cent previously.
DBS senior economist Irvin Seah said there could be opportunities amid the trade war too, as trade diversion effects – in which the reshuffling of supply chains to countries not involved in the trade war, such as Asean and Singapore – would help to offset some of the negative impact.
Mr Song pointed out that the better-than-expected performance in the third quarter, despite global challenges to the economy, is a positive sign, but dark clouds remain. The recent global stocks rout, for example, shows an ongoing market correction that is indicative of poor confidence if the trend persists, he said.
MTI is due to release its full and final economic figures for the third quarter next month.