Singapore maintains full-year GDP forecast as economy expands 3.9% in Q2

SINGAPORE: Singapore will maintain its growth forecast for 2018 as data showed the country’s economy grew at a slightly better-than-expected 3.9 per cent in the second quarter from a year ago, the Ministry of Trade and Industry (MTI) said on Monday (Aug 13).

Gross domestic product is expected to grow between 2.5 and 3.5 per cent this year – a range the Government had updated in May, from an initial forecast of 1.5 to 3.5 per cent.

FILE PHOTO: A view of the skyline of Singapore

For the second quarter, the year-on-year GDP figure is a slight upward revision from the Government’s initial estimate of 3.8 per cent, but a moderation from the 4.5 per cent in the previous three months. 

On a quarter-on-quarter seasonally adjusted annualised basis, the Singapore economy expanded at a slower pace of 0.6 per cent, compared to the 2.2 per cent growth in the first quarter and coming in below MTI’s forecast of 1 per cent.

Both figures for the second quarter also underperformed a Reuters poll of 10 economists who expected GDP growth to be 4.1 per cent on a year-on-year basis and 1.3 per cent on a quarter-on-quarter basis.

Growth was primarily supported by the manufacturing sector – which extended the double-digit growth from the previous quarter to grow by a robust 10.2 per cent year-on-year – as well as the finance and insurance sector.


Moving into the second half of the year, MTI said it expects the Singapore economy to see a moderation in its pace of expansion.

This comes amid expectations for growth in several of Singapore’s key final demand markets to slow in the second half of the year, as compared to the first six months. Since May 2018, the growth outlook of some key advanced economies, such as the eurozone and Japan, has weakened slightly, in part due to their weaker-than-expected performance in the first half.

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China’s economy also expanded at a slower pace in the second quarter as compared to the first quarter. Growth is projected to ease further in the following six months on the back of a moderation in exports growth and investment growth.

At the same time, uncertainties and downside risks in the global economy have increased.

For one, recent tariff measures by the US have led to retaliatory tariffs from China, the European Union and several of the US’ key trading partners.

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"There is a risk of a further escalation of the ongoing trade conflicts that could lead to a vicious cycle of tit-for-tat measures between the US and other major economies," said MTI.

"Should this happen, there could be a sharp fall in global business and consumer confidence, and in turn, investment and consumption spending. This could then have an adverse impact on global trade flows and global growth."

Meanwhile, against the backdrop of generally tightening global financial conditions, an upside surprise in inflation could lead to a faster-than-expected normalisation of monetary policy in the US.

"This could trigger disorderly capital outflows from emerging market economies in the region, causing financial vulnerabilities in these economies to surface, particularly for those with elevated debt levels," the ministry said.

If this occurs, there could be some pullback in investment and consumption growth, with spillover effects on the rest of the region, it added.