MTI downgrades 2019 GDP growth forecast to 0.0-1.0%

The economy grew by just 0.1% in Q2.

The Ministry of Trade and Industry (MTI) has downgraded the year-end GDP growth forecast to 0.0-1.0% from 1.5-2.5% with growth expected to come in at around the mid-point of the forecast range, highlighting the muted growth outlook for the export-oriented city state.  

The move comes after the Singapore economy expanded by 0.1% YoY in Q2 from 1.1% growth in the previous quarter in the city state’s worst economic performance in ten years. 

Also read: Singapore GDP growth to fall to 0.9% by end-2019 as technical recession risks loom

The manufacturing sector contracted by 3.1% YoY, sharper than the 0.3% decline in the previous quarter. An increase in output in the biomedical manufacturing and general manufacturing clusters failed to offset heavy declines in the electronics, transport engineering and precision engineering clusters.

The wholesale & retail trade sector contracted by 3.2% YoY, larger than the 2.5% decline in the previous quarter as wholesale trade segment weakened following a decline in the machinery, equipment & supplies sub-segment.

Also read: Singapore is 3rd most vulnerable APAC country to Chinese trade decline

Growth in the accommodation & food services sector slowed to 0.9% YoY from 2.0% in the previous quarter as the food services and accommodation segments propped up headline figures. The food services segment expanded on account of higher sales at fast food outlets, other eating places and restaurants, whilst the accommodation segment grew on the back of a rise in international visitor arrivals.

The information & communications sector grew by 4.1% YoY, easing from the 5.2% growth in the previous quarter. The business services sector also eased to 0.5% growth from 1.7% in the previous quarter as the strong performance of the professional service segment offset the weakening real estate segment.

The “other services industries” also eased to 2.1% growth in Q2 from 2.6% in the previous quarter as the education, health & social services and the arts, entertainment & recreation segments drove quarterly gains.

Bright spots
The construction sector continued to demonstrate resilience after expanding 2.9% in Q2, building on the 2.8% growth in the previous quarter. Construction output was supported by public sector construction works.

The transportation and storage sector also picked up pace and grew by 2.2% YoY from 0.7% in the previous quarter as air transport and water transport segments expanded on the back of a respective increase in passengers and volume handled at Changi Airport and Singapore’s ports.

Similarly, the finance and insurance sector grew at a faster clip of 5.2% YoY from 3.2% in the previous quarter amidst robust expansions in the fund management, foreign exchange trading and other segments.

“The weaker than expected performance of the electronics and precision engineering clusters in the first half of 2019 is expected to be sustained into the remaining quarters of the year due to the deterioration in the outlook for global semiconductor demand,” the MTI said in a report.

“The downturn in these clusters will also continue to have negative spillover effects on the wholesale trade segment. At the same time, the chemicals cluster is likely to soften given weakening import demand from China. In addition to wholesale trade, growth in other trade-related services sectors like transportation & storage is likely to ease in tandem with slowing global trade volumes.”

However, the MTI remains bullish on the aerospace and food & beverage manufacturing segments, information & communications, finance & insurance sectors, education, health & social services and the construction sector.