People sit on a set of steps on Orchard Road in Singapore. (Photographer: Sanjit Das/Bloomberg)

Singapore Sees Growth Exceeding 2% in 2017 as Exports Climb

(Bloomberg) -- Singapore’s government gave an upbeat outlook on the economy, saying it will probably expand more than 2 percent this year as exports continue to strengthen.

Key Points

  • The Ministry of Trade and Industry maintained its GDP growth forecast for 2017 at 1 percent to 3 percent, but said the economy will likely grow faster than the 2 percent expansion in 2016, barring any downside risks
  • In a revised estimate of first-quarter data, the ministry said gross domestic product declined an annualized 1.3 percent from the previous three months, an improvement on its projection last month of a 1.9 percent contraction
  • The median estimate in a Bloomberg survey of 10 economists was for a 0.9 percent contraction
  • Compared with a year earlier, GDP rose 2.7 percent in the first quarter, in line with the median estimate of 17 economists
Singapore Sees Growth Exceeding 2% in 2017 as Exports Climb

Big Picture

Singapore’s economy is rebounding on the back of a recovery in export demand, led by China. That’s helping to underpin manufacturing, primarily of electronics, though domestic-focused industries, such as retail and construction, remain under pressure. The main risks to the outlook flagged by the government are rising trade protectionism and a downturn in China amid measures to curb debt.

International Enterprise Singapore on Thursday raised its estimate for export growth for this year to 4 percent to 6 percent, up from zero to 2 percent previously. The Monetary Authority of Singapore, the nation’s central bank, last month kept its growth forecast unchanged at 1 percent to 3 percent for this year, saying the momentum in the economy “remains intact” because of the stronger export performance.

Economists’ Takeaways

  • The data “is a good start but it could have been the peak in terms of momentum for 2017," said Edward Lee, regional head of research at Standard Chartered Plc in Singapore. “The central bank is quite comfortable keeping things where they are,” but if growth continues to outperform, the MAS may consider bringing forward “slight normalization of monetary policy,” he said.
  • “Authorities have turned slightly cautious on China’s outlook,” said Weiwen Ng, an economist at Australia & New Zealand Banking Group Ltd. in Singapore. “Tighter monetary conditions in China amidst financial deleveraging, potentially resulting in a steeper-than-intended pullback in credit and investment spending, is being flagged as a potential downside risk in the MTI statement today versus stability in outlook for China in the April MAS monetary policy statement.”

Other Details

  • The services industry, which accounts for about two-thirds of the economy, contracted an annualized 2.1 percent in the first quarter from the previous three months
  • Manufacturing shrank an annualized 1.5 percent in the period, compared with a decline of 6.6 percent projected last month
  • Construction grew 4.3 percent, while the finance and insurance industry contracted 17.8 percent