You are here

S'pore Q3 GDP growth shoots past forecasts to hit 3-year high

Manufacturing is star performer, but economists expect its growth to slow; recovery seems more broad-based, they say

The economy grew by 4.6 per cent in Q3, much higher than the 2.9 per cent of the preceding quarter and the 3.8 per cent projected by economists.


SINGAPORE'S economy powered its way into its strongest gross domestic product (GDP) growth in more than three years for the third quarter of 2017, but economists expect growth to moderate as a result of a slowdown in manufacturing.

Q3's stellar growth of 4.6 per cent came in much higher than the 2.9 per cent of the preceding quarter, surprising most economists; a poll by Bloomberg carried out earlier pegged the median growth forecast among them at 3.8 per cent.

The advance estimates by the Ministry of Trade and Industry (MTI) were unveiled on Friday, based on data from July and August 2017, the first two months of the quarter.

On a quarter-on-quarter seasonally-adjusted, annualised basis, the economy expanded by 6.3 per cent, an improvement from the 2.4 per cent growth in the second quarter.

Your feedback is important to us

Tell us what you think. Email us at

Manufacturing remained the star performer in Q3, but economists noted signs of a more broad-based recovery, with the continued strengthening in services.

The manufacturing sector expanded by a stellar 15.5 per cent year-on-year in Q3, faster than the 8.2 per cent growth in the previous quarter; this was also the fastest growth rate since Q1 2011.

The electronics rally is still going strong and continues to be the main driver, reflecting the global demand for IT products. Going beyond electronics, other clusters within manufacturing with "robust expansions" included precision engineering and biomedical manufacturing.

On a quarter-on-quarter seasonally-adjusted annualised basis, manufacturing grew at a remarkable pace of 23.1 per cent, up from the 3.2 per cent growth in the preceding quarter.

Despite manufacturing's continued shine, industry watchers do not expect the pace to be sustained in the next few quarters.

All eyes are now on services, which has been gaining momentum over the past few quarters. This sector, which accounts for about two-thirds of the economy, grew by 2.6 per cent in Q3 compared to a year ago, similar to the 2.5 per cent growth in the previous quarter, and the 1.4 per cent in Q1.

The stronger growth in services was attributed to finance & insurance, wholesale & retail trade and transportation & storage.

OCBC economist Selena Ling said: "While manufacturing is likely to decelerate in Q417, not least because there is a relatively higher base in Q416 at 11.5 per cent year-on-year, the broadening growth drivers in services is reassuring."

In the Monetary Authority of Singapore (MAS)'s bi-annual policy statement which was also released on Friday, the central bank said "trade-related services and several domestic-oriented industries such as retail trade also performed better".

Maybank economist Chua Hak Bin told The Business Times: "We were expecting services to come in higher. We expect services growth to be upgraded (for the final Q3 figure in November), particularly business services."

He attributed the impending rise in business services growth to surging private residential sales in the July-to-August period, and an upswing in the property market.

For the rest of 2017 and next year, he said, the services sector will "contribute a greater proportion to growth" , as the recovery broadens to the more domestic-oriented sectors and manufacturing eases, which is mostly in line with MAS's outlook.

While services and manufacturing scored well on their report cards, the construction sector remained the laggard this quarter, contracting by 6.3 per cent year on year and extending the 6.8 per cent decline in Q2.

But the economists see some light at the end of the tunnel.

Credit Suisse economist Michael Wan said: "The real weak spot is in construction, but moving into 2018, it could perhaps be less negative. Construction activity in 2018 should be driven largely by the roll-out of public infrastructure projects, but developers are starting to replenish their land banks, which could support private construction."

The economic performance in Q3 may have beaten expectations, but the official GDP growth forecast for the full year remains unchanged at 2 to 3 per cent, albeit in the upper half of the range.

MAS said in a statement on Friday: "In 2018, economic growth is expected to remain firm, though it could moderate from this year."

As GDP growth is already averaging about 3.3 per cent in the first three quarters, economists say this means either growth in Q4 could slow sharply, or that MTI might upgrade its full-year growth in November.

Maybank's Mr Chua expects the MTI to upgrade the full year GDP growth to 3 to 3.5 per cent for this year. (see amendment note)

 He expects growth to be slower next year, as manufacturing is likely to "moderate from the spectacular pace, but remain at a healthy rate". He expects the MTI to forecast growth at between 1.5 per cent and 3.5 per cent for 2018 as a start.

DBS economist Irvin Seah anticipates GDP growth to soften to 2.5 per cent in 2018, down from DBS' forecast of 2.8 per cent for 2017. He added: "Third quarter GDP will likely be the strongest this year. Growth could ease a tad in the coming quarters as the economy shifts from a recovery to a normalisation phase."

Fuller estimates of GDP growth for Q3 will be unveiled next month.

Amendment: Maybank's Mr Chua expects the MTI to upgrade the full year GDP growth to 3 to 3.5 per cent for this year and not 3 to 5 per cent as previously stated. The above article has been amended to reflect this.

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to