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Singapore’s economic growth for the third quarter came in below expectations, data from the Ministry of Trade and Industry (MTI) revealed on Thursday. The dip was due to a slowdown seen in the manufacturing sector due to a high base a year ago and weaker demand.
Gross Domestic Product (GDP) rose 2.2% in the third quarter on a year-on-year basis, slower than the 2.6% increase in the advanced estimates report a month ago and the 4.1% growth in the second quarter. Economists were expecting a growth of 2.4%.
On an annualised quarter-on-quarter basis, GDP grew by 3.0%, compared to the 1.0% growth in the previous quarter.
The MTI narrowed the full-year forecast for this year to the upper end of the previous 2.5% to 3.5% range. The growth forecast for this year is expected to be around 3.0% to 3.5%.
For next year, MTI expects growth to come in at around 1.5% to 3.5%, as global growth wanes.
The manufacturing sector expanded by 3.5% for the third quarter, coming down from the high base of a 19.1% growth a year ago and the 10.7% increase in the second quarter. All clusters within the sector expanded, except for the general manufacturing cluster which contracted as output fell for the printing and miscellaneous industries segment.
Services producing industries grew by 2.4% for the third quarter, easing slightly from the 2.8% growth in the previous quarter, as wholesale and retail trade, finance and insurance, and information and communications saw a slight pullback in growth.
The construction sector shrank by 2.3%, in a more gradual pace of decline as compared to the 4.2% contraction in the previous quarter, weighed down by weakness in public sector construction activities.
Singapore’s GDP for second half of 2018 to moderate from first half of the year
In the statement, MTI said GDP growth is expected to slowdown in the second half of this year compared to the earlier part of the year due to slower growth from the United States and China, Singapore’s key trading markets.
For the remaining quarter of this year, Singapore’s growth is expected to “moderate but remain firm,” MTI said. Outward-oriented sectors such as manufacturing plus finance and insurance sectors are expected to continue to expand, albeit at a more moderate pace, and support GDP growth for the rest of the year, it said.
GDP growth in the first three quarters of the year adds up to 3.6% on a year-on-year basis, MTI said.
2019 to see Singapore’s GDP at around 1.5% - 3.5%
For next year, the ongoing trade conflicts between the US and China will see some spill-over effects on the pace of economic expansion for most advanced and regional economies, including Singapore, said MTI.
As the fiscal stimulus implemented on the US starts to fade and monetary policy tightens further, growth in US is expected to moderate. The weaker credit growth and softer external demand will see China soften its growth for next year, albeit support seen from macroeconomic policies issued by the Chinese government.
As the external demand environment next year is seen to be “slightly weaker” than this year, topped with trade conflict risks between the US and its key trading partners and the tightening global financial environment, Singapore is expected to moderate in growth. Weaker demand will affect electronics and precision engineering clusters in the manufacturing sector and trade-facing sectors will also see an ease in pace of growth.