(Bloomberg) -- Singapore’s economic growth slowed toward the year-end as global trade tensions and rising interest rates took their toll on the export-reliant city state.
Gross domestic product rose an annualized 1.6 percent in the three months through December from the third quarter, according to an advance estimate from the Ministry of Trade and Industry Wednesday. The median forecast in a Bloomberg News survey of economists was for a 3.6 percent expansion.
Key Insights
- The manufacturing “contraction appears to have been the main culprit here," said Vishnu Varathan, head of economics and strategy in Singapore for Mizuho Bank “The broader question on 2019 is the most pertinent one here -- and the elephant in the room after China’s PMI manufacturing slumped to three-year lows. Downside risks remain significant in our view, but perhaps not cast in stone given the headline risks associated with politics and policy."
- As one of Asia’s most export-reliant nations, Singapore’s economic outlook is closely tied to global trade and growth
- Authorities have indicated the economy could cool even further in 2019, projecting a range of 1.5 percent to 3.5 percent for GDP growth
- The economy grew 3.3 percent in 2018, Prime Minister Lee Hsien Loong said Monday
- The Monetary Authority of Singapore, the nation’s central bank, tightened monetary policy twice in 2018 amid a global withdrawal of stimulus led by the Federal Reserve
- “There may be one more tightening move for MAS ahead, but that really depends on the inflation -- especially core inflation -- trajectory,” said Selena Ling, an economist at Oversea-Chinese Banking Corp. “A big game changer will be if the FOMC pauses its rate-hike cycle earlier than expected -- that would take the pressure off a lot of EM currencies”
- The Singapore dollar was little changed after the report
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- Here’s how some of the key sectors performed: the services industry, which makes up about two thirds of the economy, expanded an annualized 3.7 percent in the fourth quarter from the prior three months; manufacturing contracted 8.7 percent; construction gained 1.1 percent
- Output gains in the biomedical manufacturing and electronics clusters offset the decline in the precision engineering cluster
- Construction saw weakness in public sector building activities
- Services growth was mainly supported by the finance and insurance, business services and information and communications sectors
- The advance GDP estimates are computed largely from data in the first two months of the quarter, and are usually revised once the full quarter’s data are available
(Adds comment from economist in first bullet point.)
