Sharp GDP pullback expected in 2Q14: DBS

The services sector continues to slide.

Singapore’s advance GDP estimates are expected on Thursday, but DBS is already warning of a sharp decline in the country’s domestic output. This comes on the back of a slide in the Singapore’s manufacturing output and a the continuing weakness in the services sector.

According to DBS, Singapore’s 2Q GDP is expected to moderate to 2.3% YoY, down from 4.9% previously.

While the outlook of the manufacturing sector is expected to run sideways, the sub-par performance in the services sector is perhaps the biggest risk to our full year GDP growth forecast of 4.0%. If the growth momentum in this sector continues to moderate, our full year GDP growth forecast will have to be lowered,” noted DBS.

Here’s more from DBS:

But the biggest risk to the Singapore economy this year would be the persistent weakness in the services sector.

Growth in this sector is likely to ease further to 3.1% YoY, down from 4.4% in the previous quarter, and 5.5% in 4Q13.

This is a downward trend and warrant close attention. While base effect is at work, sequential growth in the sector has been tepid too.

The existing labour crunch due to the curbs in foreign manpower has been taking the toll out of the sector. Risk is that this sector may continue to decelerate in the coming quarters, which will post a threat to the medium term prospects of the economy given its relatively large contributions to GDP and employment.