Research and analysis

Economic update for Q2 2014 – August 2014

Published 26 August 2014

This research and analysis was withdrawn on 1 August 2016

This publication was archived on 4 July 2016

This article is no longer current. Please refer to Overseas Business Risk – Singapore

This publication was archived on 4 July 2016

This article is no longer current. Please refer to Overseas Business Risk – Singapore

Detail

GDP growth is higher than expected…

Singapore’s economy grew by 2.4% in the second quarter (compared with a year ago). This was slower than the 4.8% growth in the first quarter, as manufacturing output continued to fall and the services sector was weaker. Growth over the first half the year was above expectations at 3.5% (on the same period a year earlier).

On a quarter-on-quarter basis, Singapore narrowly missed an expected contraction in the second quarter with growth of 0.1%. This is the seventh consecutive quarter of expansion and means that Singapore is unlikely to fall into a technical recession this year.

Labour productivity fell by 1.3% in the first three months of this year though, the first quarterly contraction in a year. Productivity is a key indicator monitored by the government to indicate the progress of its economic restructuring. Between 2010 and 2013 it only improved by an average 0.2% each year. However the Ministry of Trade & Industry (MTI) points out that the aggregate productivity figure masks variations across sectors, and found that export-oriented sectors such as biomedical manufacturing and finance & insurance had grown by 2.1% per annum as they are globally competitive and quick to adapt.

..While trade gets a downgrade

Singapore’s non-oil domestic exports (NODX) are expected to fall by 1-2% this year, while total trade is expected to grow by 1.5-2.5%. Both of these areas were previously predicted to grow by 1-3% in 2014 but International Enterprise Singapore has revised them downwards as the manufacturing sector continues to stall – with electronics output contracting and slower growth of transport engineering production.

Exports fell to all of Singapore’s top 10 markets except for China, Indonesia and Malaysia. Exports to the EU fell by 13.1% over the past quarter, the second highest fall after Hong Kong (-25.4%), highlighting subdued demand from the region.

Comment

The outlook for the rest of the year looks mixed. Externally-oriented sectors such as finance, insurance and wholesale trade are expected to support growth as the global economy improves. However, labour intensive industries such as retail trade and accommodation & food will continue to feel the effects of the foreign worker restrictions and slower services growth. These are the likely reasons behind the narrowing of the official growth forecast range from 2-4% GDP growth to 2.5-3.5% in 2014.

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.