SINGAPORE - The Singapore economy expanded by 3.2 per cent in the whole of last year, official data released on Friday (Feb 15) showed, slowing from 2017’s 3.9 per cent growth and rounding off a year marked by growing protectionist tensions around the world.
Maintaining its 2019 growth forecast at 1.5 to 3.5 per cent, with growth expected to come in slightly below the mid-point of the forecast range, the Ministry of Trade and Industry (MTI) said these same tensions have increased since the last quarter, with the added threat of a sharper-than-expected China slowdown and a worsening of its trade conflict with the United States dragging down the Singapore economy.
Brexit was also highlighted as potential headwind in MTI’s quarterly Economic Survey of Singapore. Britain has a March 29 deadline to exit the European Union.
MTI permanent secretary Loh Khum Yean said a no-deal Brexit, in which Britain exits the EU without a withdrawal agreement, poses a downside risk to Singapore for 2019.
“There is uncertainty because negotiations are dragging on, and there is no clarity. This could potentially introduce trade frictions between the UK and its trading partners,” said Mr Loh, adding that Britain is still an important trading and economic partner of Singapore.
While the impact of Brexit-related uncertainties on Singapore has been limited, they could affect Singapore’s investor and consumer sentiment depending on how the negotiations pan out, said Mr Loh.
MTI said the Singapore economy grew by 1.9 per cent year on year in the last quarter of 2018, its slowest pace since the third quarter of 2016, when it grew 1.2 per cent and down from the 2.4 per cent growth in the previous quarter. Growth also came in below MTI’s flash estimate of 2.2 per cent and economists’ expectations of 2.3 per cent as polled by Bloomberg.
On a quarter-on-quarter seasonally adjusted annualised basis, the Singapore economy expanded by 1.4 per cent, which was the same as the previous quarter.
Manufacturing grew by 5.1 per cent year on year compared with the 3.5 per cent growth in the preceding quarter. The sector shrank by 2.7 per cent on a quarter-on-quarter basis, reversing the marginal 0.7 per cent growth previously.
The sector was driven mainly by growth in the biomedical manufacturing, transport engineering and electronics clusters, said the MTI.
The construction sector continued its decline, albeit at a slower pace, shrinking by 1.0 per cent year on year compared with a 2.3 per cent contraction in the previous quarter. Output of the sector was weighed down by the weakness in public sector construction works, said the MTI.
The wholesale and retail trade sector also shrank by 0.6 per cent year on year, reversing the 1.8 per cent growth in the third quarter. This was due to sluggish performance of both the wholesale trade and retail trade segments, with the wholesale trade segment facing declines in the machinery, equipment and supplies, and the retail segment contracting due to weak motor vehicle sales.
However, growth in the air transport segment helped grow the transportation and storage sector by 0.5 per cent year on year. This was still lower than the 1.9 per cent expansion in the previous quarter.
The accommodation and food services sector also expanded by 2.9 per cent year on year, moderating from the 4.0 per cent growth in the third quarter.
The fastest growth was in the infocomms sector, which expanded by 6.1 per cent year on year, faster than the 5.4 per cent recorded in the third quarter. The MTI said growth was mainly supported by the IT and information services segment, which benefited from robust demand for IT solutions by firms.
Finance and insurance grew by 4.1 per cent year on year, faster than the 3.9 per cent in the third quarter. Bolstering this was resilient demand for insurance services and the structural ramp-up of "new economy" activities such as digital payments, said the MTI.
Business services grew by 2.8 per cent on a year on year, down from 3.3 per cent in the previous three months, while other services expanded from 0.9 per cent to 1.6 per cent year on year in the fourth quarter.
For this year, the MTI said the manufacturing sector is likely to see a significant moderation in growth following two years of robust expansion. In particular, the electronics and precision engineering clusters are expected to face external headwinds due to weakening global demand for semiconductors and semiconductor equipment with the fading of the global electronics cycle.
Second, growth in outward-oriented services sectors such as wholesale trade, transportation and storage, and finance and insurance is expected to ease in tandem with the moderation in growth in key advanced and regional economies.
Nonetheless, the information and communications sector and the education, health and social services segment are expected to remain resilient, supported by firms' robust demand for IT and digital solutions and the ramp-up of operations in healthcare facilities respectively, the MTI said.
The construction sector is likely to see a turnaround after three consecutive years of contraction, as the pickup in contracts awarded since the second half of 2017 should translate into construction activities in the quarters ahead.