Singapore’s economy posted faster growth in the second quarter than previously estimated by the government as a recovery in global trade helped to buoy manufacturing.

Highlights of GDP report
  • Gross domestic product rose a seasonally-adjusted and annualized 2.2 percent in the second quarter from the previous three months, the Ministry of Trade and Industry said on Friday, revising its earlier estimate of 0.4 percent
  • Median estimate of six economists in a Bloomberg survey was for growth of 0.5 percent
  • Compared to the same period last year, GDP rose 2.9 percent in the second quarter, higher than the 2.5 percent median estimate in a Bloomberg survey
  • Ministry narrowed growth forecast range for 2017 to 2-3 percent from 1-3 percent

Big Picture

As one of Asia’s most trade-dependent countries, Singapore has benefited from a recovery in global trade since late last year, led by strong Chinese demand for electronics and other manufactured goods. The economy is likely to grow 2.5 percent in 2017, Prime Minister Lee Hsien Loong said on Tuesday, a projection reiterated by the Ministry of Trade and Industry on Friday.

While export-led industries are expanding strongly, there are mounting risks. Consumer-focused industries such as retail remain weak in the face of job cuts and rising debt. There are also doubts over whether China can sustain its growth as the government tries to curb a credit bubble.

The Trade Ministry cited three main risks to the global economy—trade protectionist threats, faster-than-expected interest-rate increases in the U.S. and a pullback in credit demand in China—but said the potential for these to have a significant impact on growth has eased compared to three months ago.

The Monetary Authority of Singapore, the nation’s central bank, has kept its policy stance unchanged for more than a year amid subdued price pressures and weak growth. The MAS uses the exchange rate as its main tool and is scheduled to make its next policy decision in October.

Economists’ Takeaways

  • “As long as regional trade and economic momentum remains steady and if the labor market continues to stabilize, it should bode quite well for private consumption and consumption of services,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp. “It tells you how far the pendulum has swung from last year to now, people were worried about Trump, Brexit, the French elections, but the threats seem to have tapered off a bit.”
  • “I don’t think China can maintain the 6.9 percent they saw in the second quarter, so they probably will be slowing down but not sharply,” said Francis Tan, an economist at United Overseas Bank Ltd. “They’re controlling credit tightening very well right now. If they tighten further, things could become a big mess especially since this is a critical year with the leadership handing over.”

Other Details

  • The services industry, which accounts for about two-thirds of the economy, grew an annualized 3.3 percent in the second quarter from the previous three months
  • The finance and insurance sector rebounded with a seasonally-adjusted annualized 3.9 percent gain from the previous quarter, when it slumped 19 percent
  • Manufacturing rose an annualized 2.9 percent; the ministry said the sector will continue to provide support to the Singapore economy in the second half, backed by strong performance in the electronics and precision engineering clusters