Here's why the pressure is up for Singapore's services sector

It's a hefty 68% of overall GDP.

According to DBS, Signapore services sector has turned. Year-on-year growth in this sector has been declining steadily over the last two years. 

But it grew 1.7% YoY in 4Q12, exactly in line with DBS forecast. This is up from a flat growth in the previous quarter. Sequentially, it expanded 2.5% in 4Q12 against a sluggish 0.4% in the third quarter.

Here's more from DBS:

Now this sector accounts for about 68% of overall GDP. If this sector turns, the entire economy will move along with it. This has been evident in several occasions on previous years.

More importantly, services sector growth has finally started to grind north despite the domestic labour crunch. Return in investor confidence as well as stronger intra-regional trade will provide the necessary impetus for growth in this sector in the coming quarters.

With that, we continue to maintain our full year GDP growth forecast of 3.2% for the year. Growth momentum in the near term will remain flattish but it should pick up from the second quarter onwards.