Singapore: Economic growth cools to a two-year low in the third quarter; annual GDP growth in the second quarter revised upwards
According to an advanced estimate released on 12 October by the Ministry of Trade and Industry (MTI), the economy slowed in the third quarter on the back of weakness in goods-producing industries. The economy expanded 2.6% on an annual basis in Q3. This was down markedly from the upwardly revised 4.1% figure recorded in Q2 (previously reported: +3.9% year-on-year) and the weakest print since Q3 2016, but marginally above market expectations of 2.5% growth. In quarter-on-quarter seasonally-adjusted annualized terms (SAAR), however, GDP growth reached 4.7% in Q3, expanding nearly four times faster than the revised 1.2% pace seen in Q2 (previously reported: +2.2% SAAR).
A sizeable moderation in manufacturing growth, which decelerated to 4.5% over the same period of 2017 from a solid double-digit expansion in Q2 (Q2: +10.6% yoy; Q2 previously reported: +10.2% yoy), primarily drove the weaker expansion in the third quarter. Nonetheless, the electronics, biomedical manufacturing, and transport engineering clusters buttressed growth. Meanwhile, the construction sector continued to shrink in Q3, albeit at a softer rate than in Q2, and was dragged by sluggish public sector construction (Q3: -3.1% yoy; Q2: -4.2% yoy). Lastly, growth in the services sector was steady at 2.9% in Q3, supported by the finance and insurance, business services, and wholesale and retail trade sub-sectors.
The third quarter’s result reaffirms signs of a slower growth trajectory in H2, muffled by waning growth in the all-important manufacturing sector and unfavorable comparatives. Moreover, measures implemented in July to cool the property market could continue to suppress growth in the construction sector, while tit-for-tat trade retaliations between the U.S. and China—both important trading partners for Singapore—cloud the outlook. Despite this, robust domestic demand and export-oriented sectors should continue to drive growth into 2019.