13-04-2013, 08:09 AM
The Straits Times
www.straitstimes.com
Published on Apr 13, 2013
Economy contracts as factory output falls
GDP shrinks 0.6% in Q1 but Govt keeps full-year growth forecast of 1-3%
By Alvin Foo
A SLIDE in manufacturing sent the economy into a surprise first-quarter slump, in the first quarterly year-on-year decline since mid-2009.
Gross domestic product (GDP) shrank 0.6 per cent from a year ago, according to Ministry of Trade and Industry advance estimates yesterday - instead of the small growth that experts were expecting.
But the downbeat number has not dimmed expectations that the year will still be a positive one.
The Government has kept its full-year growth forecast of between 1 per cent and 3 per cent, with the economy expected to improve for the rest of the year.
And the Monetary Authority of Singapore (MAS) has lowered its full-year inflation forecast to between 3 per cent and 4 per cent, down from 3.5 per cent to 4.5 per cent, while maintaining a modest and gradual appreciation of the Singdollar.
A few experts were caught out by the GDP estimate yesterday. Economists in a Reuters poll had tipped first-quarter growth of 0.2 per cent from a year ago.
CIMB economist Song Seng Wun said yesterday: "The first quarter should be the year's trough, but it was a bigger hole than we had expected."
The chief culprit was manufacturing, which makes up about a quarter of the economy. The sector fell 6.5 per cent but other sectors fared brighter - construction grew 7 per cent and services expanded 1.2 per cent.
The estimates were largely based on January and February data - a period when manufacturing and exports dived. This has led most economists to expect an upward revision next month when more complete data is available.
This is likely if improvements in the purchasing managers' index meant stronger manufacturing and exports last month, said Barclays economist Joey Chew.
What was more significant about yesterday's numbers, analysts noted, was that the Government appeared more confident of growth prospects. OCBC economist Selena Ling said: "The more important signal is the retention of the official growth forecast, which still implies a modest pick-up for the rest of the year."
The MAS noted: "While the economy experienced some consolidation in the first three months of 2013, it should see a gradual improvement for the rest of the year on the back of a recovery in external demand."
It expects the manufacturing and export-oriented services industries to gradually improve with domestic-driven sectors, such as construction and related financing and real estate activities remaining resilient.
Bank of America Merrill Lynch economist Chua Hak Bin said: "A gradual recovery in external demand should provide some lift in the second half."
The MAS also said the world economy's prospects have improved since late last year, with bright factors such as Japan's fiscal stimulus and a gradual pick-up in the United States housing market and private demand.
Singapore Business Federation chief operating officer Victor Tay said: "Our domestic demand still leads the way. But our exports, which reflect our international competitiveness, are declining."
Still, manufacturers are tipping a turnaround soon on improving global sentiment. Singapore Manufacturing Federation honorary secretary Moh Chong Tau said: "We'll see a much stronger result in the second half of the year."
alfoo@sph.com.sg
www.straitstimes.com
Published on Apr 13, 2013
Economy contracts as factory output falls
GDP shrinks 0.6% in Q1 but Govt keeps full-year growth forecast of 1-3%
By Alvin Foo
A SLIDE in manufacturing sent the economy into a surprise first-quarter slump, in the first quarterly year-on-year decline since mid-2009.
Gross domestic product (GDP) shrank 0.6 per cent from a year ago, according to Ministry of Trade and Industry advance estimates yesterday - instead of the small growth that experts were expecting.
But the downbeat number has not dimmed expectations that the year will still be a positive one.
The Government has kept its full-year growth forecast of between 1 per cent and 3 per cent, with the economy expected to improve for the rest of the year.
And the Monetary Authority of Singapore (MAS) has lowered its full-year inflation forecast to between 3 per cent and 4 per cent, down from 3.5 per cent to 4.5 per cent, while maintaining a modest and gradual appreciation of the Singdollar.
A few experts were caught out by the GDP estimate yesterday. Economists in a Reuters poll had tipped first-quarter growth of 0.2 per cent from a year ago.
CIMB economist Song Seng Wun said yesterday: "The first quarter should be the year's trough, but it was a bigger hole than we had expected."
The chief culprit was manufacturing, which makes up about a quarter of the economy. The sector fell 6.5 per cent but other sectors fared brighter - construction grew 7 per cent and services expanded 1.2 per cent.
The estimates were largely based on January and February data - a period when manufacturing and exports dived. This has led most economists to expect an upward revision next month when more complete data is available.
This is likely if improvements in the purchasing managers' index meant stronger manufacturing and exports last month, said Barclays economist Joey Chew.
What was more significant about yesterday's numbers, analysts noted, was that the Government appeared more confident of growth prospects. OCBC economist Selena Ling said: "The more important signal is the retention of the official growth forecast, which still implies a modest pick-up for the rest of the year."
The MAS noted: "While the economy experienced some consolidation in the first three months of 2013, it should see a gradual improvement for the rest of the year on the back of a recovery in external demand."
It expects the manufacturing and export-oriented services industries to gradually improve with domestic-driven sectors, such as construction and related financing and real estate activities remaining resilient.
Bank of America Merrill Lynch economist Chua Hak Bin said: "A gradual recovery in external demand should provide some lift in the second half."
The MAS also said the world economy's prospects have improved since late last year, with bright factors such as Japan's fiscal stimulus and a gradual pick-up in the United States housing market and private demand.
Singapore Business Federation chief operating officer Victor Tay said: "Our domestic demand still leads the way. But our exports, which reflect our international competitiveness, are declining."
Still, manufacturers are tipping a turnaround soon on improving global sentiment. Singapore Manufacturing Federation honorary secretary Moh Chong Tau said: "We'll see a much stronger result in the second half of the year."
alfoo@sph.com.sg