Singapore's GDP grows 0.7% in 2019 following 0.8% rise in Q4

SINGAPORE'S economy expanded 0.8 per cent in the fourth quarter of 2019, according to advance estimates from the Ministry of Trade and Industry (MTI) on Thursday, in line with private sector economists' expectations.

Gross domestic product (GDP) in the final quarter of the year came in at 0.8 per cent year on year, a slight uptick from the 0.7 per cent clocked in Q3. This was exactly what private sector economists estimated in a Bloomberg poll.

This brings Singapore's full-year GDP growth to 0.7 per cent, according to flash data, as predicted by a Monetary Authority of Singapore poll of economists released in early December.

MTI had earlier expected full-year economic growth to be between 0.5 and 1 per cent, reflecting optimism after two earlier downgrades that had at one point included expectations of zero growth.

This is a worse showing than 2018's GDP growth of 3.1 per cent and the slowest since the global financial crisis in 2009, which saw an expansion of just 0.1 per cent year on year.

Despite the lacklustre performance, DBS Group Research economist Irvin Seah believes Singapore's economy is slowly getting out of the woods.

"A trough in the growth cycle has been registered, with emerging signs of bottoming in the external environment. Barring any unforeseen negative shocks, growth momentum is expected to pick up gradually in the coming quarters," Mr Seah said.

On a quarter-on-quarter seasonally-adjusted annualised basis, however, the economy expanded at a slower pace of 0.1 per cent compared to the 2.4 per cent growth in the third quarter, MTI said.

The manufacturing sector contracted by 2.1 per cent on a year-on-year basis in Q4, extending the 0.9 per cent decline in the previous quarter. The contraction was due to output declines in the electronics, chemicals and transport engineering clusters, which more than offset output expansions in the precision engineering, biomedical manufacturing and general manufacturing clusters, MTI said.

The construction sector saw a 2.1 per cent year-on-year growth in Q4, slightly slower than the 2.4 per cent expansion in Q3. MTI said growth in the sector was supported by public sector construction activities.

The services producing industries expanded by 1.4 per cent year on year in Q4, faster than the 0.9 per cent growth in the previous quarter. MTI said growth was primarily supported by the finance and insurance sector, the other services industries, and the business services sector. On the other hand, the wholesale and retail trade sector contracted in tandem with weakness in exports and retail sales performance.

MTI is expected to release the preliminary GDP estimates for Q4 and the whole of 2019 in February.

Based on MTI's flash estimates, economists differed in their views on how the economy would fare in 2020.

Barclays economist Brian Tan expects 2020 growth to rise "only modestly to a still-subpar 0.9 per cent".

"Our caution on the growth outlook stems from a continued divergence between the exports and production of electronics, which remained sizeable as of November 2019," Mr Tan said.

Selena Ling, chief economist of OCBC Bank, expects 2020 GDP growth to come between 1 and 2 per cent year on year.

Ms Ling said: "The 2020 growth prognosis remains attendant on the external risks and global economic environment, but stars are aligning towards a more supportive recovery story, especially with the highly anticipated near-term signing of the Phase 1 US-China trade deal as well as more policy accommodation from China to ameliorate its ongoing slowdown and other challenges."

Maybank economists Lee Ju Ye and Chua Hak Bin posted a more optimistic outlook, expecting 2020 growth to come in at 1.8 per cent. "A cyclical growth recovery will pan out for manufacturing and exports with a partial US-China trade deal and resumption of business capital expenditure plans," they wrote in a report.

Economists are also watching out for the next milestone, the Budget 2020 statement to be delivered on Feb 18, where Deputy Prime Minister Heng Swee Keat is expected to announce a slew of measures to support businesses and workers.