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The Singapore economy grew by 1.8% on a year-on-year basis in the first quarter, unchanged from the previous quarter, says the Ministry of Trade and Industry this morning.
On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 0.2%, slower than the 6.2% growth in the preceding quarter.
The ministry is also maintaining a GDP growth forecast for 2016 at 1.0 to 3.0%.
“The global economic outlook has weakened since early 2016, with global growth for the year now expected to be broadly similar to that in 2015. In particular, the growth outlook for the advanced economies has deteriorated marginally,” says MTI.
Domestically, the softening of global economic conditions, as well as the continued sluggishness in global trade, could weigh on externally-oriented sectors such as the manufacturing and transportation & storage sectors.
Persistent low oil prices will also continue to dampen the outlook for firms in the marine & offshore segment, and those in the precision engineering cluster that support the oil & gas industry, the ministry adds.
In the first quarter, the republic’s manufacturing sector contracted by 1.0% year-on-year, following the 6.7% decline in the previous quarter. Growth was dragged down primarily by the transport engineering and precision engineering clusters.
The two clusters were in turn weighed down by the weak performance of firms in the marine & offshore segment and firms that produce equipment for the oil & gas industry respectively.
Growth in the construction sector picked up to 6.2% year-on-year, from 4.9% in the previous quarter, supported by public sector construction works and private industrial building works.
The information & communications sector grew by 3.2% year-on-year, comparable to the 3.3% growth in the previous quarter. The expansion was mainly driven by growth in the IT & information services segment.
The finance & insurance sector expanded by 2.4% year-on-year, unchanged from the previous quarter, weighed down by the financial intermediation segment, even as the sentiment-sensitive and insurance segments experienced robust growth.
In its global economic outlook, the ministry said there is a risk that ongoing reforms in China could have the unintended effect of precipitating a significant drop in demand. If this materialises, China’s economy could slow down more sharply than expected. The impact of the slowdown could also be amplified through the financial system should debt defaults spike.
There also continues to be the risk of an unanticipated quickening of the normalisation of monetary conditions in the US. Should this happen, regional countries could face large capital outflows, resulting in pressures on their currencies and asset markets.
In the Eurozone, uncertainties in the run-up to the referendum in June on Britain’s exit from the European Union (Brexit) could adversely affect sentiments and investor confidence in the region, thus leading to lower investments and consumption. The loss of investor confidence amidst heightened political risks could also lead to higher debt servicing costs in the peripheral economies.
This article first appeared in The Edge Singapore Market Report.