Business

Economy grows at fastest pace in over three years

July to September quarter expansion of 4.6% beats forecasts


The economy expanded at its fastest pace in more than three years in the July to September quarter, buoyed by the surging manufacturing sector.

Despite the strong showing, the central bank opted to keep its exchange rate policy stance unchanged, but said that it expects more stable and even growth in the coming year.

The economy expanded 4.6 per cent in the third quarter compared with the same period a year earlier, showed Trade and Industry Ministry advance estimates released yesterday, which take into account data from the first two months of the quarter.

This beat economists' forecasts of 3.8 per cent growth, and was also the fastest quarterly expansion since 2014.

The better-than-expected performance was lifted by a stellar showing in manufacturing, which surged 15.5 per cent over the same period a year earlier. The sector, which makes up a fifth of the economy, has been its brightest spot this year.

Services, which makes up two-thirds of the economy and employs the bulk of workers, grew 2.6 per cent, boosted by trade-related segments such as finance and insurance and transportation and storage.

But the construction sector shrank 6.3 per cent year-on-year amid lacklustre private-sector building activity.

"The main story behind the economic growth numbers is that recovery is broadening out," said DBS senior economist Irvin Seah, noting that most key service segments are back in expansion mode.

"Third-quarter growth will likely be the strongest this year. Growth could ease a tad in the coming quarters as the economy shifts from a recovery to a normalisation phase."

The Monetary Authority of Singapore (MAS) struck a more upbeat note in its policy statement released yesterday, even as it announced that it is keeping its policy stance unchanged.

The central bank uses the exchange rate as its main monetary policy tool to strike a balance between inflation from overseas and economic growth. The rate is allowed to float within a band that can be adjusted when monetary policy is reviewed.

The Singdollar band is now on a path of zero appreciation against the currencies of key trading partners - a "neutral" policy stance put in place in April last year amid slow growth and low inflation.

The economy has performed "slightly better than expected" since its last policy review, MAS noted. It expects growth to come in at a steady but slightly slower pace next year compared with this year.

Growth should also become more even across sectors in the coming quarters, as the boost from electronics moderates while the pace of contraction in other sectors levels off.

MAS said economic expansion this year and next will be driven by productivity gains.

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EconomyFinanceMonetary Authority of Singapore