Economy pauses

TODAY: Economy pauses for breath after Q2's breakneck pace

Oct 14

Despite Q3 contraction, Singapore still on track to meet 2010 forecast: MTI

SINGAPORE - The Ministry of Trade and Industry (MTI) announced this morning that the Singapore economy remains on track to achieve the overall growth forecast of 13 to 15 per cent for the whole of 2010.

Advance estimates showed that the economy expanded by 10.3 per cent in the third quarter of 2010 compared to the same period a year ago. However, on a seasonally-adjusted quarter-on-quarter annualised basis, the economy contracted by 19.8 per cent, a reversal from the growth of 27.3 per cent in the previous quarter.

The median forecast of 19 economists surveyed by Bloomberg News was for a 15.7-per-cent contraction.

"The decline in growth momentum was an expected correction from the exceptional growth in the first half of the year," noted the MTI in its press release.

Asian nations from Thailand to Japan have taken steps in the past month to cool the appreciation in their currencies, which is threatening exports at a time when global growth is slowing. Prime Minister Lee Hsien Loong has said Singapore's economy may "moderate" in the coming months after a record first-half expansion, citing risks from the Europe and the United States.

"Singapore is typically a bellwether for the region's export outlook and it is the first to show cracks as global growth slows," economist Alvin Liew of Standard Chartered said before the report. Threats to Asian growth include "the fading impact of stimulus packages, stubbornly high unemployment rates and austerity measures that are likely to crimp consumption in the West," he added.

On a seasonally adjusted quarter-on-quarter annualised basis, the manufacturing sector contracted by 57 per cent in the third quarter, after expanding by 67 per cent in the preceding quarter. This decline is largely attributable to the biomedical manufacturing cluster, the MTI said.

The construction sector also contracted on a seasonally adjusted quarter-on-quarter annualised basis, by 12 per cent, compared to an expansion of 29 per cent in the preceding quarter. This was mainly due to the completion of key commercial and industrial building projects earlier in the year.

The services producing industries registered a modest sequential growth of 1.6 per cent, following a 13 per cent expansion in the previous quarter. Growth in trade-related services sectors, such as wholesale trade and transport and storage moderated from the high growth seen in the first half of the year.

Growth in the rest of the year will be underpinned by a number of industry-specific factors, noted the Trade Ministry. In particular, continued growth in global demand for electronic products will lend some support to the electronics and precision engineering clusters.

Increasing visitor arrivals driven by a resurgent Asian market and new tourism product offerings such as the Integrated Resorts will continue to bolster the tourism-related sectors, the Ministry added.

MTI will release the preliminary GDP estimates for the third quarter of 2010, next month in the Economic Survey of Singapore.