Economy expanded 2.7% in Q1
Ministry of Trade and Industry predicts growth is likely to come in above 2 per cent, but external risks remain
The economic outlook for this year appears to be gradually brightening, with the Ministry of Trade and Industry (MTI) indicating yesterday that growth is likely to come in above 2 per cent.
This sits in the higher reaches of its 1 per cent to 3 per cent forecast for the year, and could surpass last year's total growth of 2 per cent.
Improving global sentiment has been driving a strong pick-up in trade-related sectors.
However, some sectors, especially those like retail and food and beverage that rely on domestic demand, continue to struggle.
Economists are cautious about prospects for the rest of the year, with some warning that stronger growth may not be sustainable.
"The main concern is that the turnaround thus far has been uneven and restricted to just a few externally-driven clusters," said DBS senior economist Irvin Seah.
"The rest of the economy has yet to feel the uplift and the labour market has also remained soft.
"Plainly, there are structural challenges weighing on domestic sectors and the doldrums are unlikely to dissipate in the near term."
The MTI released its updated outlook yesterday alongside finalised growth figures for the first three months of the year, which showed that the economy expanded 2.7 per cent year-on-year in the January to March quarter, lifted largely by a resurgent manufacturing sector.
This was slightly higher than previous estimates of 2.5 per cent growth.
In addition, trade agency IE Singapore has upgraded its forecast for exports this year. It now expects non-oil domestic exports to rise 4 per cent to 6 per cent, up from estimates of 0 per cent to 2 per cent.
Singapore's economy was boosted largely by a few sectors in the first quarter - electronics, precision engineering and transportation and storage, noted Permanent Secretary for Trade and Industry Loh Khum Yean at a briefing yesterday.
"We expect these sectors to support growth over the rest of the year, but there's a certain unevenness in the performance of other sectors."
For instance, the construction sector continued to shrink in the first quarter on the back of weak private-sector building activity, while transport engineering, which includes the marine and offshore segment, continues to face headwinds.
This is partly why the MTI is maintaining its forecast of 1 per cent to 3 per cent growth this year for now despite the more sanguine outlook, Mr Loh said, adding that officials will continue to monitor the situation.
Maybank Kim Eng economist Chua Hak Bin said growth is showing signs of broadening - albeit slowly - to other segments, including financial, business and wholesale trade services.
But the MTI warned that external risks remain, including political uncertainties over the outcome of Brexit talks and potentially tighter credit conditions in China.