Sought after service: Service sector spurs Singapore economy growth

Despite an unemployment rate of 2.1% in 3Q10, the services sector was able to generate a total of 24,100 new jobs as compared to a loss of about 400 jobs in the manufacturing sector.

The services sector is gradually taking on the role as the key driver of economic growth as manufacturing activities continue to moderate. Latest business sentiment surveys by the Economic Development Board and Department of Statistics show that manufacturing companies are increasingly becoming more cautious about the outlook ahead whereas services companies are generally more upbeat about the business prospects in the coming months.

In a statement, DBS Bank said slower global growth momentum tempered the 42% YoY growth experienced by the manufacturing sector since the first half of the year, and implies a more modest pace of ex-pharma manufacturing activities ahead.

“It is our long held view that the services sector is poised to resume its traditional role as a reliable and stable pillar of growth for the Singapore economy. Strong capital inflows should lend support to the financial and business services industries while the tourism related services industries are expected to benefit from the healthy number of tourist arrivals. Moreover, regional growth though may be slower in the near term, should remain fairly resilient despite the weakness in the developed economies. And that is crucial to the services sector, which tends to be dependent on the regional markets,” the bank said.

While DBS foresees growth in 2011 to soften to 4.5% from 15% this year, it expects the services sector to pick up some of the slack from the manufacturing sector as the economy gradually shift towards a more sustainable pace of growth.
 

View the graph here.