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Quick takes: Lacklustre Q2 economic growth due to drag from construction

Friday, July 14, 2017 - 10:22

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Singapore's economy chugged along with a 2.5 per cent pace of growth in the second quarter of 2017, the same as the previous quarter, based on the advance estimates by the Ministry of Trade and Industry.

SINGAPORE'S economy chugged along with a 2.5 per cent pace of growth in the second quarter of 2017, the same as the previous quarter, based on the advance estimates by the Ministry of Trade and Industry.

But the latest reading, based on two months of data, came below market consensus of 2.7 per cent. The first-quarter growth rate was also revised down to 2.5 per cent from the earlier 2.7 per cent.

Here are some comments from economists on the latest gross domestic product (GDP) numbers:

Mizuho Bank economist Vishnu Varathan:

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Market voices on:

"The first consolation is that softer Q1 was due to significant construction sector downgrade - sharp 6.1 per cent year-on-year contraction - whereas manufacturing was revised a tad firmer.

"More pertinently, Q2 drag was disproportionately driven by construction (-5.6 per cent year-on-year) too, and while property demand may not surge, if nascent signs of bottoming are sustained and public sector projects pick up, this drag may at least be reduced in coming quarters."

OCBC Bank economist Selena Ling:

"With H1 2017 growth averaging 2.5 per cent year-on-year, there is no need to adjust our full-year 2017 GDP growth forecast of 2.5 per year-on-year for now.

"We also anticipate static neutral monetary policy settings at the October MPS (monetary policy statement). Given that growth and inflation trajectories are largely going to plan, there is little impetus to move ahead of other major central banks like the FOMC (Federal Open Market Committee) which is embarking on its balance sheet unwinding intentions later this year."

Citibank economist Kit Wei Zheng:

"Lacklustre services and construction growth does not yet suggest a strong broadening of growth drivers as yet. Still, if the export recovery persists as per our expectations, we would watch for firmer signs of recovery in domestic demand and outside of manufacturing, and an eventual reduction in job market slack. Given the Monetary Authority of Singapore's (MAS) updated view of 'declining' downside risks to global growth, and possible upside risks to core, we see a 30 per cent probability of MAS normalisation in October 2017."

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