According to official data released by the Ministry of Trade and Industry (MTI) on Thursday (21 November), Singapore narrows its annual forecast for economic growth to between 0.5% to 1%. This is because the economy for the third quarter is slowly improving.
This is the third revision in the country’s growth forecast for this year, which was previously marked to be between 0% to 1%.
“Taking into account the performance of the Singapore economy in the first three quarters of the year and the outlook for the fourth quarter, the 2019 GDP growth forecast for Singapore is narrowed to “0.5 to 1.0 per cent”, from “0.0 to 1.0 per cent”, MTI said in its statement.
It also added that for the year 2020, the Republic’s economy is expected to be in between 0.5% to 2.5%.
In Q3, the economy grew 0.5% on a year-on-year basis, slightly higher from the revised 0.2% growth in the quarter before and an earlier official estimate of 0.1%.
On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 2.1%, a reversal from the 2.7% contraction in the second quarter and a lot higher than the Government’s advance estimation of 0.6%.
Even though the global growth remains weak, MTI highlighted that there are “signs of stabilisation in the global economy” since the last Economic Survey of Singapore in August.
Domestically, the manufacturing sector performed better than expected in the third quarter on the back of robust expansions in the biomedical manufacturing cluster and the aerospace segment of the transport engineering cluster, even though the electronics cluster continued to contract, MTI stated.
For the remaining quarter of the year, MTI expects the performance of the manufacturing sector and trade-related services sectors such as wholesale trade to remain subdued in view of the ongoing downswing in the global electronics cycle.
However, sectors such as construction, information and communications, finance and insurance, and education, health and social services are projected to continue to post steady growth, it noted.
As for the year 2020, the global growth is expected to witness a “modest pickup”, led by an improvement in the growth outlook for emerging market and developing economies.
However, growth in a few of Singapore’s key final demand markets such as the US and China, is expected to ease.
“In the US, GDP growth is projected to moderate in 2020 as investment growth is expected to continue to slow amidst prolonged trade tensions and policy uncertainty,” MTI noted.
Nevertheless, uncertainties in the global economy remain due to a number of reasons. One of the reason is US-China trade tensions, as existing tariffs are still in place and additional tariffs may be imposed.
Besides that, a steeper-than-expected slowdown of the Chinese economy is also another reason, on top of Brexit-related uncertainties.
If that’s not all, ongoing uncertainties in Hong Kong and geopolitical tensions in the Middle East could lead to financial market volatility, and have negative spillover effects on the region and Singapore.
On balance, given the growth outlook for Singapore’s key final demand markets, and the projected recovery in the global electronics cycle in the year ahead, MTI expects growth in the Singapore economy to pick up modestly in 2020 as compared to 2019.
Manufacturing sector, in particular, is expected to return to positive growth, led by a gradual recovery in the electronics and precision engineering clusters.
Improved conditions in these clusters is also likely to support growth in related sector such as wholesale trade, MTI explained.
At the same time, growth in the information and communication as well as finance and insurance sector is expected to remain healthy, whereas the education, health and social services segment should remain resilient as operations in healthcare facilities continue to ramp up.
The construction sector is also projected to see sustained growth in the coming year, MTI added.