Singapore's economy is on track for a standout performance this year thanks to an improved global outlook, with the labour market showing signs of recovery.
But economists expect growth to moderate in the coming year due to a possible tapering in electronics demand and the slowdown in key markets such as China.
The Ministry of Trade and Industry (MTI) has upgraded its forecast for economic growth this year to 3 per cent to 3.5 per cent, up from an earlier estimate of 2 per cent to 3 per cent.
It announced this alongside third-quarter economic growth data released yesterday, which showed Singapore's economy expanded 5.2 per cent in the July to September period over the same quarter a year earlier - its strongest showing since 2013.
The headline figure was revised upwards from October's advance gross domestic product (GDP) growth estimates of 4.6 per cent. This also beat economists' expectations of a 5 per cent expansion, according to a poll by Bloomberg.
The robust showing comes amid a more upbeat global environment and strong demand for electronics, MTI Permanent Secretary Loh Khum Yean said yesterday.
Trade agency IE Singapore now expects non-oil domestic exports to expand by 6.5 per cent to 7 per cent this year, up from a forecast of 5 per cent to 6 per cent in August.
The labour market - which has been stuck in the doldrums - is also showing signs of recovery.
Mr Terence Ho, divisional director of the manpower planning and policy division at the Ministry of Manpower, cited earlier data which showed that the seasonally adjusted citizen unemployment rate has gone down since the first quarter of this year. For the first three quarters of 2017, the number of retrenchments has been lower than each corresponding period.
Signs indicate that the labour market will also "improve slightly" alongside the increase in hiring during the year-end festive season, said Mr Ho.
While manufacturing has been the breakout star this year, economists say that it is about time for services - which make up two-thirds of the economy - to shine.
"The main story behind the GDP numbers is that the recovery is broadening," said DBS economist Irvin Seah. Services expanded 3 per cent year on year in the third quarter, which was its strongest showing since 2015.
Mr Seah went one step further and said services could even become the main engine of growth next year if the sector continues to improve.
All service clusters, except for accommodation and food services, grew in the third quarter.
Economists are mostly upbeat about future prospects - even for the shrinking construction sector.
Ms Yong Yik Wei, director of economics at MTI, expects improvement in construction demand in the coming year as public sector projects are brought forward.
Looking ahead to next year, the Singapore economy is expected to moderate compared with this year, but "remain firm", said MTI.
The official forecast is for growth of 1.5 per cent to 3.5 per cent next year.
Nomura economist Brian Tan is less sanguine about next year. He does not believe that this year's pace of growth is likely to be sustained, and sees little spillover from semiconductor-related sectors on the rest of the economy.
He added that the employment situation is still "not as strong as it should be".
"At least for next year, we are not terribly gung-ho about the strength of the economy and wages. It is a question of whether this 5 per cent (GDP) growth really reflects what is on the ground, and right now it doesn't feel that way," he said.
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