Growth is somewhat dampened by surprise downward revision for fourth quarter
SINGAPORE’S economy grew even faster than expected last year, with a robust 7.7 per cent expansion fuelled by the booming construction and services sectors.
That was a notch up from an earlier estimate of 7.5 per cent – thanks to upward revisions to growth in the first nine months.
There was, however, a sting in the tail of the latest figures, published yesterday by the Trade and Industry Ministry (MTI).
The strong full-year growth was somewhat overshadowed by fourth-quarter figures, which turned out to be weaker than previously estimated.
Economic growth slowed to 5.4 per cent from October to December, said the MTI, lower than the 6 per cent previously estimated and far below the 9.5 per cent recorded in the third quarter.
On a seasonally-adjusted, quarter-on-quarter basis, the economy shrank 4.8 per cent, more than the 3.2 per cent estimated earlier by the Government The downward adjustment surprised economists, who said the final quarter would best indicate prospects for this year.
Already, the fast-deteriorating United States economy has prompted the MTI and other economists to cut their growth forecasts for this year.
‘We think the slowing growth momentum from the fourth quarter could bleed over to the first quarter of this year,’ said OCBC Bank economist Selena Ling.
Last year’s strong growth was powered by the red-hot construction and services sectors. The once-mighty manufacturing sector turned out to be the laggard.
Construction growth hit a record 19.6 per cent, the fastest pace since 1996, while services expanded 8.1 per cent, accelerating from 2006’s 7.5 per cent.
Manufacturing growth, on the other hand, slowed to 5.8 per cent from 11.9 per cent in 2006.
It was a similar picture in the fourth quarter, except that manufacturing growth was an exceptionally dismal 0.2 per cent.
The revised data came a month after advanced estimates for the fourth quarter were published at the start of the year. The early figures were based largely on the first two months of the quarter, so the latest statistics suggested that conditions worsened considerably in December, analysts said.
The adjustment was mainly due to services, which grew 7.7 per cent instead of 8.3 per cent, and manufacturing, which fared even worse than an earlier predicted 0.5 per cent expansion.
‘Financial services have peaked as we have forecast. The industry will likely moderate further. The heady days of high-teens growth are over,’ said Citigroup economist Kit Wei Zheng. He said the fall in financial services growth to 15.9 per cent in the fourth quarter suggested that the industry peaked in the third quarter, when it surged 20.1 per cent.
OCBC’s Ms Ling said manufacturing would remain lacklustre in the current quarter, if not the first half of the year. ‘With the global slowdown story, we do not expect any quick turnaround on the manufacturing front,’ she said.
Still, some economists are not ringing the alarm bells just yet.
HSBC economist Prakriti Sofat said while US growth slowed in the fourth quarter, that was not the cause for Singapore’s weak figures.
Analysts pinpointed the volatile pharmaceutical industry as the main reason for the slowdown.
‘Manufacturing output plunged, largely due to protracted production delays and technical problems at Singapore’s biggest pharmaceutical plant,’ said Barclays Capital economist Leong Wai Ho. ‘Supply bottlenecks were the main cause, not a drop-off in demand.’
Indeed, pharmaceutical’s recent sharp contraction could well set it up for a big rebound in the next few months, said analysts.
More optimistic economists are also looking to resilience in domestic and regional economies.
The construction sector is expected to continue growing robustly, given the strong pipeline of both public and private projects.
Sectors such as tourism and real estate services will be partially shielded from a US slowdown by neighbouring economies, on which they are more dependent, said the MTI.
Source: The Straits Times 15 Feb 08