The Monetary Authority of Singapore (MAS) forecasts the state’s real gross domestic product (GDP) to grow by 2.5 percent to 3.5 percent in 2014 and to maintain a broadly similar pace of expansion next year.
In its Macroeconomic Review published in October, MAS said the continued improvement in global demand should provide some support to the external-oriented sectors of the Singapore economy, such as manufacturing and trade-related services.
“However, the growth performance will vary across industries. Some manufacturing firms are facing supply-side constraints and falling product prices. As they reconfigure their operations in Singapore, output could be negatively impacted in the short term. The domestic-oriented healthcare and education sectors will stay resilient on the back of strong underlying demand, though other services industries that are reliant on labour and face greater competition could experience profit margin pressures.”
It added: “The Singapore economy should expand at a moderate pace in the quarters ahead.”
In its assessment of the Singapore economy over the last six months, it said growth “was flat over the last two quarters.”
Citing estimates recently released by the Ministry of Trade and Industry, MAS said Singapore’s GDP expanded by 1.2 percent in the third quarter of the year on a quarter-on-quarter seasonally adjusted annualized basis, following a 0.1 percent contraction in the second quarter.
MAS described domestic economic activity in the last six months as “sluggish,” with GDP growth in the second and third quarters of 2014 averaging 0.6 percent quarter-on-quarter.
It noted that against the uneven recovery in the global economy, the external-facing services sectors saw some retraction in activity. More recently, the manufacturing sector rebounded in the third quarter of this year, but the domestic-oriented sectors, which were strong contributors to overall growth in the first quarter, slowed appreciably.
“The manufacturing sector turned around, reflecting a pickup in the electronics and precision engineering industries,” it continued. “Overall services growth was muted, as the weakness in global commodity demand weighed on re-export and trade financing activities.”
On the global economy, MAS predicts its continued expansion, “but at an uneven pace across countries.” The U.S. economy will lead the recovery, with private consumption supported by sustained improvement in the labor market and corporate investment gaining traction amid rising capacity utilization rates.
However, growth in the core Euro zone economies and Japan is likely to remain weak, hampered by structural headwinds, it said.
In Asia, the economies in the Association of Southeast Asian Nations and the newly industrializing economies “should benefit from the US recovery and the mild upturn in the global IT industry, while China is expected to stay on its moderating growth path.”
Photo: Sippala
