You are here

Updated quick take: Analysts cut forecast after Singapore's disappointing Q3 GDP growth

30596091 - 29_01_2014 - SINGAPORE GDP.jpg
The Singapore economy performed worse than the market had expected in Q3, expanding just 0.6 per cent compared to a year ago, according to advance estimates of gross domestic product (GDP) released by the Ministry of Trade and Industry (MTI) on Friday.

THE Singapore economy performed worse than the market had expected in Q3, expanding just 0.6 per cent compared to a year ago, according to advance estimates of gross domestic product (GDP) released by the Ministry of Trade and Industry (MTI) on Friday.

This was slower than the 2 per cent growth seen in Q2, and the median growth forecast of 1.7 per cent year-on-year expected by economists.

Here are some economists' comments:

Francis Tan, economist at UOB:

"We are concerned that prolonged slowdown in the services sector will imply higher labour redundancies as we start crystal-balling into 2017.

"We have downgraded our 2016 GDP growth forecast to 1.4 per cent, from 2.2 per cent earlier, and maintain that the USD/SGD will end 2016 at 1.38."


"For the year as a whole, DBS had been expecting growth of 1.5 per cent. That will be revised lower in coming days, probably to about 1 per cent.

"If there is any good news to be gleaned, it is that much of the drop in output this year has been oil-related and crude prices appear to have stabilized around US$50 per barrel. Hence a similar hit to GDP growth is not expected next year. We continue to look for 1.5-2.0 per cent growth in 2017."

Selena Ling, Head of Treasury Research & Strategy at OCBC Bank:

"The 1.4 per cent year-on-year manufacturing expansion we saw in Q2 2016 was a blip. The stabilisation in the Jul and Aug industrial production data and the return of the latest manufacturing PMI data to >50 (expansion territory) were also likely illusionary.

"Looking ahead, the manufacturing growth will likely continue to be weighed down by transport engineering and precision engineering (due to oil and gas weakness globally), biomedical and general manufacturing clusters. The World Trade Organisation's recent downgrade of both 2016 and 2017 global trade growth forecasts and China's latest export data reinforces the grim picture.

"A downgrade for full-year growth forecast is inevitable due to 3Q disappointment and the downward revision of H1 GDP growth estimates. Given the flat-lining of services growth momentum, we revise our full-year GDP growth forecast for 2016 to 1.3 per cent year-on-year and 2017 to 1.5 per cent, down from 1.9 per cent and 2.0 per cent previously. The official growth forecast is at the lower end of the 1-2 per cent range for 2016 and only slightly higher for 2017."

Weiwen Ng, economist for South and Southeast Asia at ANZ Research:

"Today's Q3 advance GDP print reinforces our view that tough times are here to stay for Singapore, with growth running the risk of remaining stuck in low gear.

"Notably, services remain entrenched in a recession. The services sector - which accounts for two-thirds of the economy - continued to contract for the third straight quarter, registering a quarter-on-quarter sequential decline of 1.9 per cent in Q3. This portends further downside risks to growth.

"The last time Singapore's service sector registered three straight quarters of quarter-on-quarter seasonally adjusted annualised contraction was during the 2008/09 global financial crisis.

"In our view, core inflation is unlikely to pick up meaningfully into next year, especially with the output gap set to stay negative, S$NEER stronger compared to a year ago, and commercial rentals still soft. We forecast core inflation to increase modestly from an expected 0.8 per cent in 2016 to 1.3 per cent into 2017, compared to MAS expectations of a move closer to its historical average of 2 per cent.

"We still see the risk of the next move by MAS to be an easing, but that will likely be next year, particularly if economic conditions deteriorate further."


"The downside surprise came from manufacturing sector growth, which fell to -1.1 per cent year-on-year from 1.4 per cent in Q2, and services sector growth, which fell to -0.1 per cent from 1.2 per cent. Construction sector growth was broadly stable at 2.5 per cent, edging down from 2.6 per cent.

"The Q3 GDP outturn poses a downside risk to our full-year 2016 GDP growth forecast of 1.4 per cent, which already represents a slowdown from 2.0 per cent in 2015. The MAS expects 2016 GDP growth in the lower half of the official growth forecast range of 1.0-2.0 per cent. Nonetheless, labour cost pressures have sustained despite the weak economy because of curbs on foreign labour as part of the economic restructuring agenda.

"We therefore expect core inflation to grind gradually higher over the rest of the year and average 1.0 per cent for the full year- similar to MAS projections, which were also left unchanged - up slightly from 0.5 per cent in 2015."