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Quick Takes: MTI remains cautious given uncertain external outlook

Singapore's Q1 GDP growth came in higher than expected on Tuesday.

SINGAPORE'S Q1 GDP growth came in higher than expected on Tuesday. The 2.6 per cent year-on-year expansion overshot both the initial flash estimate of 2.1 per cent growth, and the market's expectation that this could be raised slightly to 2.2 per cent.

The Ministry of Trade and Industry (MTI) cautioned that the external outlook "remains clouded" with significant uncertainties and downside risks, including deflation fears in the eurozone and lingering apprehension over when, and the pace at which, the Federal Reserve will raise the Fed funds rate.

Here's what private-sector economists had to say about the latest data:

Bank of America Merrill Lynch's Chua Hak Bin: "Services surprised on the upside, leading growth and offsetting weakness from manufacturing. The decoupling of services from manufacturing growth is increasingly visible, in part because of the disproportionate impact from restructuring, rising wage costs and land constraints on manufacturing."

Citi's Kit Wei Zheng: "MTI's comments remained cautious versus February, noting 'significant downside risks and uncertainties' in the external outlook, with 2015 growth now only 'marginally' better than 2014. However, the eurozone economy is expected to improve in 2015, a tad more optimistic than in February when growth was expected to be weak."

Barclays's Leong Wai Ho and Bill Diviney: "All told, we continue to expect a modest acceleration in GDP in 2015 to 3.4 per cent, with growth likely to see support from lower oil prices and stronger demand from the US and neighbouring Asean economies, which should offset the ongoing drag from the property market and labour market tightness."

UOB's team of economists: "With (Q1 GDP growth) out of the way, the more interesting report for Singapore will be April industrial production at 1pm, which is seen declining -3.4 per cent year-on-year from -5.5 per cent in March, and the seasonally-adjusted figure is expected to rise 1.3 per cent month-on-month from 1.2 per cent in March."