Fragile world clouds Singapore growth outlook
2015 likely to start on a soft note after factory activity contracts amid erratic global demand
Singapore's economic growth slowed more than expected in the fourth quarter of last year as the manufacturing sector contracted in the face of erratic global demand, raising concerns about the outlook for the coming year.
Gross domestic product expanded 1.6 per cent in the fourth quarter on an annualised and seasonally adjusted basis, advance estimates from the Ministry of Trade and Industry showed yesterday.
That was down sharply from 3.1 per cent in the third quarter and below the median forecast of 3 per cent growth.
The weak figures came as the global economy ended last year in a fragile state, with factory activity shrinking in China, euro-zone business growth remaining weak and emerging-market giant Russia in a spiralling currency crisis.
The manufacturing sector contracted 5.8 per cent month on month in the fourth quarter, and shrank 2 per cent year on year.
"Unlike 2014, when we started on a strong note for the first half and after that the momentum tapered off, we could be starting 2015 on a relatively soft note, especially as people are looking forward to the [US Federal Reserve] normalising policy," Oversea-Chinese Banking Corp economist Selena Ling said.
She expects Singapore's economy to grow 2 to 3 per cent this year. The government is forecasting growth of 2 to 4 per cent.
Full-year growth for 2014 slowed to 2.8 per cent from 3.9 per cent a year earlier.
Singapore's trade agency has said non-oil domestic exports are likely to grow 1 to 3 per cent this year. Its forecast for last year is for a drop of 1.5 to 1 per cent, after a 6 per cent fall in 2013.
The electronics sector, a key driver of exports, has struggled to tap into global demand for smartphones and other hi-tech products and lagged regional competitors such as South Korea and Taiwan.
In addition, the government's push to reduce a politically unpopular reliance on overseas workers has led to a tight labour market and wage pressures, affecting economic growth.
Prime Minister Lee Hsien Loong said in his New Year speech that growth "will be slower than we are used to", due partly to the tightening of policies, including those on foreign workers.
JP Morgan economist Benjamin Shatil said: "We are cautious on the outlook for 2015 as the economy faces headwinds from a softening property market and slowing in the credit cycle. External demand will also likely remain modest."
Most economists expect the Monetary Authority of Singapore to stick to its tight stance of allowing a "modest and gradual" appreciation of the Singapore dollar at its next policy review in April and keep all related policy settings unchanged.
