15-07-2011, 04:32 AM
Business Times - 15 Jul 2011
Growth grinds to a near-standstill in Q2
0.5% year-on-year growth lower than expected; global uncertainties casting a long shadow
By TEH SHI NING
(SINGAPORE) Flash estimates show a sharper- than-expected slowdown in Singapore's growth last quarter, prompting at least one economist to warn that full-year GDP may slip below the official 5-7 per cent growth range forecast.
While most economists still view the 0.5 per cent year-on-year growth in Q2 as a passing 'soft patch' and expect a pick-up this quarter, many were also quick to flag looming global uncertainties surrounding Europe's sovereign debt crisis and still tepid economic recovery in the US.
Dragged down by manufacturing, Singapore's marginal growth last quarter came in shy of the consensus one per cent forecast, and was a sharp deceleration from the 9.3 per cent growth in the first quarter.
The sequential decline was even starker. Overall GDP shrank an annualised 7.8 per cent quarter-on- quarter, after adjusting for seasonal factors, on the back of a 22.5 per cent contraction in manufacturing output and a 2.9 per cent decline in the services industry.
The Ministry of Trade and Industry (MTI), whose advance estimates are based largely on April and May's data, yesterday said this reflects 'a slowdown across many sectors'.
Manufacturing's 5.5 per cent year-on-year contraction was marked, coming after 16.4 per cent year-on- year growth in the first quarter.
Volatile pharmaceutical output was once again the main cause but electronics output fell too, 'partly due to an easing in global demand for semiconductor chips', MTI said.
Services, the economy's key growth driver this year, also saw year-on-year growth moderate to 3.3 per cent as weak trade flows hit wholesale and retail trade services and less stock trading activity pulled down financial services. The bright spots were in tourism-related sectors, which 'continued to register healthy growth due to strong visitor inflows', MTI said.
However, several economists noted that given industrial production's contraction in May, the Q2 manufacturing estimate implies a rebound in factory output in June, to be announced later this month. DBS economist Irvin Seah, for one, thinks the pharmaceutical industry may have ramped up production in June after two sluggish months.
This, along with improved production data from regional economies, bodes well for third-quarter growth; so no technical recession is expected.
'The domestic growth drivers remain essentially intact,' said OCBC economist Selena Ling. Manufacturing will be bolstered by new chemical plant operations and biomedical inventory building, while lending and insurance activity should prop up financial services growth.
Most are thus keeping to full-year growth forecasts in line with the government's, though with the caveat that global uncertainties may prolong weakness and trigger downgrades.
In fact, at least one private sector economist has downgraded his full-year growth forecast to one below the official range. Bank of America Merrill Lynch (BofAML) economist Chua Hak Bin now expects full-year growth of just 4.8 per cent, after 2010's record growth of 14.5 per cent.
'Weak US growth and a possible blow-up of the European debt crisis are of larger concern,' he said, adding that BofAML's global financial stability index points to 'escalating risks for global contagion if European policymakers are unable to reassure markets in the near term'.
There is also the fact that monetary tightening in both China and India has slowed their domestic growth, dampening Singapore's exports outlook, Dr Chua added.
HSBC economist Leif Eskesen, too, sees the advance second-quarter GDP estimates as confirmation of how Singapore is 'vulnerable to the global economy's gyrations' and thinks that even with a rebound in pharmaceutical output, full-year growth could be lower than expected.
Weaker growth, coupled with concerns over the persistence of inflation, means most economists now expect the Monetary Authority of Singapore (MAS) to maintain its current exchange rate policy of gradual appreciation at its October review.
Growth grinds to a near-standstill in Q2
0.5% year-on-year growth lower than expected; global uncertainties casting a long shadow
By TEH SHI NING
(SINGAPORE) Flash estimates show a sharper- than-expected slowdown in Singapore's growth last quarter, prompting at least one economist to warn that full-year GDP may slip below the official 5-7 per cent growth range forecast.
While most economists still view the 0.5 per cent year-on-year growth in Q2 as a passing 'soft patch' and expect a pick-up this quarter, many were also quick to flag looming global uncertainties surrounding Europe's sovereign debt crisis and still tepid economic recovery in the US.
Dragged down by manufacturing, Singapore's marginal growth last quarter came in shy of the consensus one per cent forecast, and was a sharp deceleration from the 9.3 per cent growth in the first quarter.
The sequential decline was even starker. Overall GDP shrank an annualised 7.8 per cent quarter-on- quarter, after adjusting for seasonal factors, on the back of a 22.5 per cent contraction in manufacturing output and a 2.9 per cent decline in the services industry.
The Ministry of Trade and Industry (MTI), whose advance estimates are based largely on April and May's data, yesterday said this reflects 'a slowdown across many sectors'.
Manufacturing's 5.5 per cent year-on-year contraction was marked, coming after 16.4 per cent year-on- year growth in the first quarter.
Volatile pharmaceutical output was once again the main cause but electronics output fell too, 'partly due to an easing in global demand for semiconductor chips', MTI said.
Services, the economy's key growth driver this year, also saw year-on-year growth moderate to 3.3 per cent as weak trade flows hit wholesale and retail trade services and less stock trading activity pulled down financial services. The bright spots were in tourism-related sectors, which 'continued to register healthy growth due to strong visitor inflows', MTI said.
However, several economists noted that given industrial production's contraction in May, the Q2 manufacturing estimate implies a rebound in factory output in June, to be announced later this month. DBS economist Irvin Seah, for one, thinks the pharmaceutical industry may have ramped up production in June after two sluggish months.
This, along with improved production data from regional economies, bodes well for third-quarter growth; so no technical recession is expected.
'The domestic growth drivers remain essentially intact,' said OCBC economist Selena Ling. Manufacturing will be bolstered by new chemical plant operations and biomedical inventory building, while lending and insurance activity should prop up financial services growth.
Most are thus keeping to full-year growth forecasts in line with the government's, though with the caveat that global uncertainties may prolong weakness and trigger downgrades.
In fact, at least one private sector economist has downgraded his full-year growth forecast to one below the official range. Bank of America Merrill Lynch (BofAML) economist Chua Hak Bin now expects full-year growth of just 4.8 per cent, after 2010's record growth of 14.5 per cent.
'Weak US growth and a possible blow-up of the European debt crisis are of larger concern,' he said, adding that BofAML's global financial stability index points to 'escalating risks for global contagion if European policymakers are unable to reassure markets in the near term'.
There is also the fact that monetary tightening in both China and India has slowed their domestic growth, dampening Singapore's exports outlook, Dr Chua added.
HSBC economist Leif Eskesen, too, sees the advance second-quarter GDP estimates as confirmation of how Singapore is 'vulnerable to the global economy's gyrations' and thinks that even with a rebound in pharmaceutical output, full-year growth could be lower than expected.
Weaker growth, coupled with concerns over the persistence of inflation, means most economists now expect the Monetary Authority of Singapore (MAS) to maintain its current exchange rate policy of gradual appreciation at its October review.