Upon looking at the global and domestic economic environment, and the performance of Singapore economy in the first half of the year, the Ministry of Trade and Industry (MTI) revealed on Tuesday (13 August) that the gross domestic product (GDP) growth forecast for this year is slashed to “0.0 to 1.0%”, adding that the growth is expected to come in at around the mid-point of the forecast range.
This is not the first time MTI cut its growth expectations for this year. It did it in May when it lowered the upper bound from 3.5%, and forecast growth of 1.5% to 2.5%. This figure already showcased a steep slowdown, against the full-year GDP growth of 3.1% marked in 2018.
Just last month, the official estimates released by MTI noted that the Republic’s year-on-year gross domestic product (GDP) growth only grew by a scant of 0.1% in the second quarter. This is the lowest figure the country has recorded since the 2009 Great Recession when the economy shrank by 1.2%.
Based on MTI’s statement, it is stated that on a quarter-on-quarter seasonally-adjusted annualised basis, the economy shrunk by 3.3%, a cut from the expected 3.4% contraction, but a reversal from the 3.8% growth in the first quarter.
In addition, during the second quarter of the year, manufacturing dropped by 3.1% year-on-year, a sharper dip from a 0.3% contraction in the previous quarter. This happened as manufacturing output was largely weighed down by output declines in the electronics, transport engineering and precision engineering clusters, he statement noted.
As for the service producing industries, it grew by 1.1%, as opposed to the 1.2% in the first quarter – all thanks to the growth in sectors like transportation and storage, information and communications, as well as finance and insurance.
For the construction sector, it expanded its growth to 2.9%, extending the 2.8% growth in the first quarter, since construction output was supported by public sector construction works.
Outlook for 2019
Upon reviewing the economic performance in the second quarter of the year, MTI noted that the global growth outlook has weakened further since its last Economic Survey in May.
In particular, the growth prospects of key emerging markets and developing counties like ASEAN-5 and China have worsened, partly due to the escalation in the US-China trade conflict in the past months, the MTI explained.
If that is not all, the global electronics cycle has entered a sharper-than-expected downswing, with the ongoing downturn exacerbated by the uncertainty caused by the US-China trade conflict. The global electronics downswing will pose a greater drag on economies with sizeable electronics and related sectors.
“Looking ahead, GDP growth in many of Singapore’s key final demand markets in the second half of 2019 is expected to slow from, or remain similar to, that recorded in the first half,” MTI noted.
It added, “Against this challenging external macroeconomic backdrop, and the deepening downturn in the global electronics cycle, the Singapore economy is likely to continue to face strong headwinds for the rest of the year.”
Despite overall bad performance, MTI pointed out that there are several areas of strength in the Singapore economy.
It noted that within the manufacturing sector, the aerospace and food, as well as beverage manufacturing segments are expected to continue to perform well given firm demand conditions.
“Among the services sectors, the growth of the information & communications and finance & insurance sectors is projected to remain healthy, bolstered by sustained demand for enterprise IT solutions and increased demand for payment processing services respectively,” it added.
Meanwhile, the education, health and social services segment’s growth is likely to be resilient, supported by the ramp-up of operations in healthcare facilities. On top of that, the recovery in the construction sector is also expected to be sustained.