Singapore Q3 GDP beats forecasts

Bloomberg’s Haslinda Amin reports on Singapore’s third-quarter GDP figures and the revised 2017 GDP forecast

Bloomberg’s Haslinda Amin reports on Singapore’s third-quarter GDP figures and the revised 2017 GDP forecast

Singapore's gross domestic product expanded a seasonally adjusted 8.8 percent on quarter in the third quarter of 2017, the Ministry of Trade and Industry said in Thursday final revision.

Export growth is set to taper off next year, with International Enterprise Singapore saying in a separate report on Thursday that expansion will probably be zero to 2 percent in 2018, compared with an estimated 6.5 percent to 7 percent for this year. The current neutral monetary policy stance thus "remains appropriate", said Jacqueline Loh, deputy managing director of the Monetary Authority of Singapore (MAS).

In line with this stronger economic and trade outlook, IE Singapore also announced an upgrade in its forecast for non-oil domestic exports (NODX) for 2017.

According to official estimates, MAS core inflation is expected to be around 1.5 per cent this year and average 1 to 2 per cent in 2018, while CPI-All Items inflation is projected to come in at around 0.5 per cent this year, and stay in the range of 0 to 1 per cent next year.

Headline inflation remained flat at 0.4 per cent on a year-on-year basis for the third consecutive month in October, as higher food and private road transport prices offset a steeper decline in housing costs and a smaller increase in utility prices.

The growth is buoyed by manufacturing, which surged nearly by 35% quarter-on-quarter in Q3, while the ministry expects expansion in the USA and some emerging markets to improve global growth next year. Year-on-year Q3 GDP growth hits 3.6% in real term, lower than Q2's 3.9%.

All manufacturing clusters expanded, with the exception of transport engineering, which continued to shrink on the back of sustained weakness in the marine and offshore engineering segment. Construction continued to suffer, contracting for a third quarter by 5.3 percent.

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While making projection of 2018, MTI said, "Global growth is expected to pick up marginally in 2018 on the back of stronger growth in the United States and some emerging markets and developing economies".

Growth has been surprisingly strong across Southeast Asia, with third-quarter data from the Philippines and Malaysia last week and Thailand this week exceeding forecasts, providing a more upbeat tone to the region as the US Federal Reserve tightens monetary policy.

The manufacturing sector is likely to continue to expand and provide support to overall GDP growth.

Manufacturing has been this year's breakout star, but economists say it is about time for services, which make up two-thirds of the economy, to shine. "Our preliminary expectation is for 2018 full-year growth to come close to 4.0%", Carnell said.

"The synchronized global recovery has legs", said Chua Hak Bin, a Singapore-based senior economist with Maybank Kim Eng Research.

However, global downside risks remain, such as uncertainty about the USA administration's policies, lingering concerns over protectionist sentiments, as well as possible inflation pressures due to stronger oil prices.

"At least for next year, we are not terribly gung-ho about the strength of the economy and wages. It's a question of whether this 5 per cent growth really reflects what's on the ground, and right now, it doesn't feel that way".

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