Economy expected to grow 2.5%

This article is more than 12 months old

Analysts polled by MAS say manufacturing sector to charge ahead

Singapore's manufacturing sector is expected to keep soaring on the back of an upturn in global trade, a new survey of private-sector economists has found.

However, sectors dependent on spending by Singapore consumers and businesses are likely to continue lagging behind, according to those polled in the survey conducted by the Monetary Authority of Singapore (MAS).

Still, the economists said tentative signs are emerging that strong trade-driven growth is rubbing off on the wider economy.

The economists polled in the MAS' latest quarterly survey expect the local economy to grow 2.5 per cent this year, unchanged from estimates in the previous quarter's survey.

The MAS survey reflects the views of 21 analysts who monitor the Singapore economy.

Their estimates come after the Government last month narrowed its forecast for economic growth this year to 2 per cent to 3 per cent, from an earlier estimate of 1 per cent to 3 per cent.

Official forecasts tip full-year growth of about 2.5 per cent.

While this is more robust than last year's 2 per cent expansion, it masks uneven performances across various sectors of the economy.

Respondents in the latest poll expect the manufacturing sector to charge ahead by 6.6 per cent this year, up from an estimate of 5 per cent in June's survey.

The labour market has held up quite well and domestic consumption is not going to fall off a cliff Selena Ling, OCBC Bank economist

Manufacturing, making up a fifth of the economy and a key growth driver this year, is being lifted by strong global demand for semiconductors and related equipment.

The finance and insurance sector is also expected to pick up pace, with economists in the latest poll forecasting 2.9 per cent growth, up from 1.9 per cent in the previous survey.

However, other sectors are doing less well.

The outlook for the construction sector has taken a sharp turn for the worse, going by the latest survey, with respondents tipping a contraction of 4.2 per cent. The previous survey, released in June, flagged 0.2 per cent growth in the sector.

The outlook for the accommodation and food services sector also worsened - it is now expected to shrink 1.5 per cent, from previous estimates of a 1 per cent expansion.

Economists polled expect overall economic growth of 2.5 per cent next year, the same pace as this year.

CIMB Private Bank economist Song Seng Wun said the poll results reflect still-uneven growth across the economy.

"We expect strong third-quarter numbers on the back of stronger exports and manufacturing, but the pickup is still very much trade-driven. Besides manufacturing, other sectors benefiting include logistics and financial services," he noted.

"On the domestic front, there are signs that the lift might be slowly broadening, but things in the service sector remain challenging - consumers are still holding back on discretionary spending."

This refers to non-essential items like travel and dining out.

OCBC Bank economist Selena Ling - who has upgraded her forecast for full-year growth from 2.5 per cent to 2.7 per cent - said recent data indicates that trade-related growth will hold up into the fourth quarter.

"We see a broadening in growth momentum beyond semiconductors and electronics. The labour market has held up quite well, and domestic consumption is not going to fall off a cliff," she said.

EconomyMonetary Authority of Singaporesurvey