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Growth in manufacturing, services slowed in 2018, trend expected to continue this year: MTI
GROWTH of both the manufacturing and services sectors slowed down in 2018, but construction appears to have bottomed out, according to the latest figures from the Ministry of Trade and Industry (MTI) on Friday.
Manufacturing – which makes up about one-fifth of the economy – grew by 5.1 per cent year on year in Q4, up from the 3.5 per cent seen in the previous quarter. However, this was revised downwards from earlier estimates of 5.5 per cent.
On a quarter-on-quarter seasonally-adjusted annualised basis, the sector shrank by 2.7 per cent, a reversal from the 0.7 per cent growth in the preceding quarter.
For the full-year of 2018, the manufacturing sector expanded by 7.2 per cent, slowing from the 10.4 per cent growth from a year ago. Growth was primarily supported by the electronics, transport engineering and biomedical manufacturing clusters.
The services sector – which makes up two-thirds of the economy – grew by 1.8 per cent in Q4 compared to a year ago. It was also revised downwards from earlier estimates of 1.9 per cent.
Overall in 2018, the services sector grew by 3 per cent last year, easing from the 3.2 per cent growth in 2017. This came on the back of the finance & insurance, business services and wholesale & retail trade sectors, which expanded by 5.9 per cent, 3.0 per cent and 1.5 per cent respectively.
As for the construction sector, it contracted by 1 per cent in Q4 - a more gradual pace of decline as compared to the 2.3 per cent contraction in the third quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector grew by 5.1 per cent, faster than the 0.7 per cent growth in the previous quarter.
For the full-year, construction remained in contraction, shrinking by 3.4 per cent in 2018. However, the sector seems to have bottomed out, shrinking at a slower pace compared to a 10.2 per cent decline in 2017. The output of the sector was weighed down by a decline in public sector construction works, even as private sector construction works rose marginally.
But Loh Khum Yean, permanent secretary for Trade and Industry, told a morning briefing that construction “is likely to see a turnaround” after shrinking for three straight years, especially as the rate of contraction has eased.
He cited a pickup in contracts awarded since the second half of 2017 and pointed to the Building and Construction Authority’s projection in January for nominal construction output in 2019 to rise to between S$28 billion and S$30 billion, from S$27 billion in 2018.
“This should come through in the coming quarters,” Mr Loh said, but added: “I can’t be more specific than that and say which quarter.”
In its outlook for 2019, the MTI expects both manufacturing and services growth to continue easing, with the manufacturing sector, in particular, to see a “significant moderation in growth” following two years of robust expansion.
The electronics and precision engineering clusters are expected to face external headwinds due to weakening global demand for semiconductors and semiconductor equipment with the fading of the global electronics cycle, said the MTI.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye have said in a report that they expect manufacturing weakness and contraction in some months in the first half of 2019.
Still, Yong Yik Wei, director of the MTI economics division, added in the briefing: “We don’t normally share the sectoral forecasts, but what we see is that the manufacturing sector has seen two years of very strong growth, so we can expect some moderation coming off the high base... But there are also still pockets of growth in manufacturing; for instance, medical technology within the biomedical cluster, and aerospace, are expected to do quite well.”
Growth in outward-oriented services sectors such as wholesale trade, transportation & storage, and finance & insurance is also expected to ease in tandem with the moderation in growth in key advanced and regional economies.
However, the information and communications sector, and the education, health and social services segment are projected to hold steady, supported by firms’ robust demand for IT and digital solutions, and the ramp-up of operations in healthcare facilities respectively.
The MTI had maintained the 2019 GDP (gross domestic product) growth forecast at “1.5 to 3.5 per cent”, with growth expected to come in slightly below the mid-point of the forecast range.